Trevor Milton Must Pay $581K In Fees After Losing Suit Against CNBC And Hindenburg, Court Orders

Trevor Milton's unsuccessful defamation case against CNBC and Hindenburg Research has ended with another costly setback for the disgraced Nikola founder.

A New Jersey judge ordered the Nikola founder to reimburse CNBC $286,087 in attorneys' fees and litigation expenses after Milton ultimately lost his appeal. Hindenburg Research will also be reimbursed by Milton to the tune of $270,475 in fees, costs of $14,053 and $10,992 in other fees, according to the order, made available on Monday. 

Milton's lawsuit against CNBC and Hindenburg was dismissed with prejudice back in December. The payment follows a December 2025 appellate decision concluding that Milton's lawsuit ran afoul of New Jersey's anti-SLAPP statute, which is designed to deter meritless lawsuits aimed at protected speech by requiring losing plaintiffs to cover the prevailing party's legal costs. 

The legal bill stems from Milton's failed attempt to sue CNBC, Nathan Anderson, and Hindenburg Research over reporting tied to Nikola's collapse. In December 2025, a unanimous New Jersey appellate panel ruled that Milton's lawsuit had been filed too late and that his effort to repackage his claims as "trade libel" instead of defamation was legally unpersuasive. The court concluded the statements at issue concerned Milton's personal credibility and conduct—not a product—and therefore were governed by New Jersey's one-year statute of limitations. It dismissed the case with prejudice and directed the trial court to award attorneys' fees under the state's anti-SLAPP law.

Milton had alleged that CNBC knowingly aired false statements and that Hindenburg coordinated with the network to damage his reputation and business prospects following its 2020 report on Nikola. But the appeals court found those claims could not proceed. It also dismissed Milton's claim that Hindenburg aided and abetted CNBC's reporting after Milton's own attorney acknowledged during oral argument that the allegation could not survive if the underlying claims against CNBC failed.

The case centered on reporting that questioned Milton's repeated claims about Nikola's technology, including representations about proprietary battery breakthroughs and the readiness of its flagship trucks. Following Hindenburg's report, Nikola itself acknowledged that its widely circulated promotional video of the Nikola One truck showed the vehicle rolling downhill rather than driving under its own power. The company also backed away from claims that it had developed key battery technology internally, instead acknowledging its reliance on outside suppliers.

Those controversies ultimately led to federal criminal charges. Milton was indicted in 2021 on securities fraud and wire fraud charges, convicted in 2022 for misleading investors about Nikola's technology and business progress, and later received a presidential pardon from Donald Trump. While the pardon erased his criminal conviction, it did not rescue his civil lawsuit. Instead, Milton's litigation ended with a dismissal, a six-figure fee award, and a more than $500,000 bill for Hindenburg and CNBC for bringing a case the courts ultimately found should never have proceeded.

Tyler Durden Mon, 07/20/2026 - 18:50

Iranian Strikes On US Bases In Jordan Aided By 'Accurate Intel' From Locals, IRGC Says

Via The Cradle

Iran's Islamic Revolutionary Guard Corps (IRGC) announced Monday that its most recent retaliatory operations against US military assets in Jordan were carried out with "cooperation and accurate information" provided by the Jordanian people.

"Honorable people and troops of Jordan, thank you for your sincere cooperation and accurate information that led to the precise targeting of US forces… and the destruction of 20 shelters where child-killing US forces were stationed in the Al-Azraq (Muwaffaq Salti) Base," it said. The IRGC added that those operations resulted in "the killing of dozens of US terrorist forces."

"With your help, the fighters of the IRGC Aerospace Force targeted large C17 transport planes and P8 command and control planes of the invading US army at Aqaba Airport with ballistic missiles and caused heavy damage to a number of them," it went on to say. "Thank you again for your efforts and cooperation," the IRGC said in another message addressing the people of Jordan. 

Iran's retaliatory strikes have inflicted heavy damage on US sites and assets in Jordan over the past several days since US President Donald Trump renewed a brutal campaign of strikes against the Islamic Republic.

Tehran's latest operations have killed a minimum of four US soldiers, including at least three in Jordan. Another has been killed in Iraq.

New satellite imagery, released by Soar Atlas, reveals additional damage at Washington’s Muwaffaq Salti Air Base in Jordan. The satellite imagery appears to show damage to at least two aircraft hangars, a large impact site near troop accommodation areas, and several destroyed shelters.

Satellite images from Jordan’s King Faisal Air Base, which hosts US troops, showed extensive damage as well. 

The IRGC also detailed its latest, overnight operations against US sites in Kuwait on 20 July – launched in response to Washington’s ninth consecutive night of violent bombardment against Iran.

It said early on Monday that the 22nd wave of Operation Victory 2 targeted US military assets at Kuwait’s Ali al-Salem Air Base.

Satellite imagery reportedly shows extensive damage at US military base in Jordan
——
New satellite images from SoarAtlas reportedly reveal additional damage at Jordan's Muwaffaq Salti Air Base following Tehran's retaliatory response against the sources of aggression in the… pic.twitter.com/7DwLVnpsd2

— The Cradle (@TheCradleMedia) July 20, 2026

According to the statement, a US early-warning radar system was completely destroyed. Additionally, a warehouse containing aviation equipment and spare parts, as well as a hangar housing US MQ-9 drones, were hit, setting several drones on fire, according to the IRGC.

The statement urged Kuwaiti citizens to be aware of Washington’s use of its territory for attacks on Iran, and for its wars and interventions across West Asia in general.

Another IRGC statement released Monday provided further details on the Iranian strike against the Al-Tanf Base in Syria, carried out on July 17 in response to a US attack that killed several Iranian troops last week. 

The US claims it has withdrawn from all bases in Syria, including Al-Tanf, where for years it trained extremist militants linked to ISIS. It remains unclear what US presence remains in Syria. The IRGC said its "surprise attack" on Al-Tanf was "dedicated to the martyred soldiers of Bampur" and "killed a number of US soldiers."

Video captures the moment that several Iranian medium to intermediate-range ballistic missiles struck Muwaffaq Salti Air Base in Jordan overnight, killing at least two and injuring several other American Servicemembers. pic.twitter.com/cJz39E1LvP

— OSINTdefender (@sentdefender) July 18, 2026

"The Strait of Hormuz remained under the full control of the Iranian Armed Forces," IRNA further quoted the IRGC as saying. 

Earlier on Monday, Iran said it hit and demobilized two tankers moving through the strait, under orders from the US. The announcements follow heavy overnight attacks carried out by Washington against Iran. 

US airstrikes hit multiple cities including Tabriz, Chabahar, Konarak, Bandar Mahshahr and Bandar Imam Khomeini. Washington’s strikes southwest of Tabriz killed one person and wounded several others, according to IRNA. 

Jordanians celebrate as Iranian missiles rain down on American positions. pic.twitter.com/6nMF6RKG1X

— DD Geopolitics (@DD_Geopolitics) July 18, 2026

US Central Command (CENTCOM) said after midnight that it "began conducting a new wave of strikes against Iran … for the ninth consecutive night," adding that "the strikes will continue degrading Iranian military capabilities used to attack commercial vessels and civilian mariners transiting… Hormuz."

Tyler Durden Mon, 07/20/2026 - 18:25

NASA Warns Scientists Understating Worst-Case Solar-Storm Scenario

As if the growing risk of a global economic disaster springing from the US-Israeli war on Iran weren't enough to worry about, researchers at NASA's Goddard Space Flight Center are warning that miscalculations and false assumptions may have resulted in an enormous underestimation of the worst-case effects of a solar storm. 

Solar storms are events in which the sun experiences a massive explosion of energy, charged particles and magnetic fields. From solar flares to coronal mass ejections (CMEs), these explosions pose a danger to all kinds of electronics, from your cell phone, computer and car to gas pumps, airplanes, power stations and everything in between.

The worst such event in recorded history was the Carrington Event of 1859. Estimated to have been as powerful as 10 billion atomic bombs, it caused telegraphs to fail across Europe. A far more modest event in 2003 disrupted the FAA's navigation computers for more than 24 hours, and the FAA was prompted to warn that high-altitude flights might receive dangerous doses of radiation. 

Critically, the prevailing theory about "solar weather" posits that there's a limit to just how much energy can be injected into Earth's polar ionosphere. Alarmingly, NASA scientists are now saying there may be no such limit to the destructive energy that could rain down on the world. They derive that suspicion from more than a million data points where solar wind was gauged by NASA craft in Earth orbit. These measurements show a direct correlation between the potency of the solar wind and upper-atmosphere currents -- rather than a declining correlation as more powerful forces confronted the theorized upper limit. “There is currently no statistical evidence to suggest an upper limit to the energy transferred from the solar wind to the polar ionosphere,” the NASA  researchers concluded.

VIDEO -- the sun's activity from July 10 to 16, as captured by NASA's Solar Dynamics Observatory:

It’s #SunDay! Here’s your space weather report for the week of July 10 - July 16:
• 1 M-class flare
• 3 C-class flares
• 29 coronal mass ejections
• 0 geomagnetic storms

This video from NASA’s Solar Dynamics Observatory (SDO) shows the week’s activity.

Those “blackouts” in… pic.twitter.com/UzSTI1N56k

— NASA Space Alerts (@NASASpaceAlerts) July 19, 2026

Here's what a co-author of the new study, Lancaster University's Dr. Maria Walach, had to say: 

“Our planet’s magnetic field does a really great job of protecting us against many space weather effects. There are however extreme cases, where satellites unexpectedly fall back to Earth, or we lose communication and GPS signals...

If there is no upper limit to our planet’s response to the solar wind, modeling for extreme cases needs to take this into account and we should be vigilant of space weather effects. Fortunately, these very extreme cases are rare, but this also means we have limited data to work with and only time will tell what happens at the very extreme one-in-a-thousand-year kind of event.” 

Putting aside the worst-case scenario, a major disaster would surely result from another event on the scale of the Carrington Event. A 2014 study by Lloyds of London in concert with Lexington, Mass-based Atmospheric and Environmental Research called it "almost inevitable," and concluded 20 to 40 million people could endure blackouts lasting anywhere from 16 days up to two years.  

Organizations like the Foundation for Resilient Societies have long been urging the implementation of measures to harden America's power infrastructure against solar events, warning that unshielded transformers and transmission systems -- which in turn fail to shield supply chains, medical services and societal order -- threaten the survival of a significant portion of the population. 

Tyler Durden Mon, 07/20/2026 - 18:00

The New Market Structure, Liquidity Dynamics, & Fragilizers: An Unprecedented Situation With Serious Implications

Authored by Alexis Maubourguet, CIO, and Clément Mary-Dauphin, CEO of Adapt Investment Managers,

RISK ACTUALLY

A holistic review of the recent changes in the distribution of risk across the financial system and their consequences for market structure in general and Liquidity Dynamics in particular.

INTRODUCTION

After a year in which “everyone won,” it would have been natural to start the new year with confidence, if not outright greed. As natural sceptics, we have always found that difficult. More recently, however, something has changed that makes it even harder: market structure.

Our primary concern is the impact these structural shifts may have on liquidity. Because this is, in our view, the most critical risk, we focus this paper on analyzing how market structure has evolved, rather than speculating on the potential catalysts that could trigger a systemic shock. In any case, regardless of the trigger, the consequences for asset prices are likely to be similar.

It is also more robust to analyze observable, existing dynamics and draw conclusions from them than to attempt to predict specific future events in an increasingly uncertain and rapidly changing world. That said, there is no shortage of potential catalysts. As of March 2026, we remain cautious on AI, private credit, energy shocks, loss of confidence in central banks, major cyberattacks, and, of course, the unknown unknowns.

Our central thesis is that the past five years have seen seven unprecedented trends that together have dramatically changed the face of global markets. In this paper we identify these trends and study their consequences for market structure. One feature of the market structure that is always front and center for ADAPT IM is liquidity. However, we don’t believe spot liquidity (right here, right now) is the most relevant notion. Liquidity is fickle. Like an umbrella, what really matters is that it is available when you need it, not when the sun is shining. We therefore focus on the way liquidity changes and reacts to shocks and shifts in the market or volatility regime. This is what we call the Liquidity Dynamics.  

Our analysis suggests that recent changes have contributed negatively to the Liquidity Dynamics for each of the seven trends mentioned above. This is extremely worrying. While our analysis of the consequences is our own and can be contested, one fact is not: the financial system is now entirely different from what it was five years ago and even more so from what it was ten years ago. We are therefore venturing into uncharted territory. That alone should be cause for caution.

In our analysis, we divide market participants into two categories: Stabilizers and Fragilizers. Stabilizers participate in maintaining a healthy and robust market structure. They tend to be contracyclical, to have a long-term investment horizon, or to carry responsibilities beyond immediate profitability. As a result, they provide liquidity in times of need and hence contribute positively to Liquidity Dynamics. In this category, we include fundamental managers, banks, and sovereign entities such as governments and central banks.

Fragilizers, on the other hand, increase concentration risk and participate in speculative behavior. They often play an important role in the virtuous circles that lead to asset bubbles. Conversely, they also act as a transmission mechanism in vicious circles on the way down. Some of them can contribute to local equilibrium through buy-the-dip strategies or to local liquidity through market-making. But because they’re procyclical, have a short investment horizon, or solely focus on immediate profitability, they stop offering liquidity in times of crisis and may even demand it. Fragilizers all have a negative contribution to the liquidity dynamics. In this group, we include private assets, passive investment, multi-strategy funds, non-committed liquidity providers, and retail investors.

We want to make it clear that we are not arguing that any of these Fragilizers, taken independently, are inherently negative for market structure, or that they should not exist. On the contrary, we are firm believers in the benefits of markets and freedom for the greater good. We are convinced that speculators play a crucial role in keeping markets fair, transparent, liquid, and efficient. A healthy market requires a balance between speculators and long-term fundamental investors. It is this balance that we question today. Over the past ten years, and more quickly over the past five, the importance of Fragilizers has expanded significantly. At the same time, the capacity of Stabilizers has steadily receded, largely through the seven trends examined in this paper. The dangers arising from the current imbalance between these two categories are the central focus of this paper.

SECTION 1: PRIVATE ASSETS AT ALL-TIME HIGH

Any study of liquidity over the past decade must begin by confronting the elephant in the room: Private Assets. Never in recent history have investors allocated such a large share of their portfolios to private markets, while simultaneously selling liquidity premium so cheap. This first trend in our study has profound implications for liquidity, extending well beyond its own dynamics.

1A. EVIDENCE

Figures 1.1 and 1.2 show the spectacular, broad-based growth of private assets. Traditional private equity allocations remain strong, but new engines of growth have emerged. On the supply side, private credit now drives expansion, often through riskier assets. The Financial Times reports that private credit firms bought nearly 14 times more consumer debt in 2025 than in 2024, including unsecured credit-card and “buy now, pay later” loans which are typically unsecured. On the demand side, retail investors now represent up to 15% of private credit funds’ investor base.

1B. CONSEQUENCES

1B.i. Greater Beta and larger exposure to tech

Rather than enhancing portfolio diversification and resilience, the rise of private assets often amounts to a doubling of beta exposure, without the same certainty on the real quality of the assets. In practice, allocators gain essentially the same underlying exposure to economic growth as in public markets, including in the sectorial allocations, but with significantly less transparency, scrutiny and liquidity.

Besides, private markets display a sector concentration similar to that of public markets, particularly in information technology. For allocators, this translates into increased sector risk across the overall portfolio. The ECB’s 2025 Financial Stability Review highlights the growing share of IT-related transactions in private markets (Fig. 1.3). As a result, investors may find themselves doubly exposed to the same sector through both public and private allocations, amplifying concentration risk rather than achieving genuine diversification.

1B.ii. Increased opacity and more risky deals

Private assets face far less scrutiny and fewer transparency requirements than public markets. While this opacity is intrinsic to the asset class, the recent acceleration in deal activity appears to be eroding due diligence standards. John Graham, CEO of the Canada Pension Plan Investment Board, told the Financial Times that private credit transactions are now executed so quickly that investors often lack adequate time for proper due diligence. This was highlighted by ECB Supervisory Board member Elizabeth McCaul, who stated that “we are trading transparency for speed […] that may be fine in good times, but in a downturn, it leaves policymakers flying blind”. The result is a weaker understanding of underlying exposures and a greater risk of mispriced credit risk within portfolios.

This concern is echoed by the IMF, which notes that the number of privately rated securities has nearly tripled since 2019. The major rating agencies have kept their volumes broadly stable, meaning that almost all the increase comes from newer agencies focused on private assets. As shown in Fig. 1.4, this shift raises questions about the consistency, comparability, and overall rigor of risk assessment in private markets.

The shift towards private markets increases opacity for the entire financial system, due to limited data availability. The indicators typically used by regulators to identify emerging crisis risks, such as excess leverage or the quality of collateral, are not always accessible in parts of the non-bank sector. The IMF has highlighted broader information gaps across non-bank financial institutions (NBFIs), which are generally less regulated than banks and subject to different reporting requirements, while the ECB noted that its analysis of the non-bank sector has at times been constrained by insufficient data (source: Bloomberg, Predicting Next Crash Made Harder as Private Markets Obscure Data). The impact of NBFIs will be discussed further in Section 4.

1B.iii. Contagion risks to the broader financial system

Private credit can act as a transmission channel to the broader financial system through its links with other actors. Bloomberg reports that U.S. banks had extended about $300 billion in loans to private credit funds and other investment vehicles that originate private loans (Fig. 1.5), out of an estimated $500 billion in total loans. While the OFR notes that most private credit funds are only moderately leveraged, it also highlights that 5% has a leverage ratio above 3.5. In the event of defaults, this highly leveraged segment could create stress for the industry as a whole and, in turn, for banks. (source: OFR Brief: Measuring counterparty exposures to private credit; Bloomberg, Private credit’s‘ back leverage’ is another pain point for funds). Second, life insurers could become a transmission channel as private capital groups increasingly use them to fund lending (Fig. 1.6). In some cases, they even acquire them outright, as illustrated by Apollo’s control of Athene, KKR’s ownership of Global Atlantic, and Aquarian’s acquisition of Brighthouse. The Financial Times reports that this shift has gone hand in hand with growing exposure among life insurers to Level 3 assets — that is, assets whose valuation relies on models rather than observable market prices. For example, they reached 36% of Athene’s total assets in the third quarter of 2025 and 30% at Global Atlantic, up from 12% and 10% in 2021 (source: Financial Times, How insurance became the lifeblood of private credit).  Taken together, these links suggest that private credit is not a stand-alone segment of the private markets, but an increasingly interconnected one whose stresses can be transmitted to other financial actors.

Private assets at an all-time high: a growing fault line in market liquidity.

Over the past five years, investors have poured an ever-larger share of their portfolios into private assets, effectively surrendering one of the most valuable premia available: liquidity. In a world flush with cash, locking capital away for years looked like a free lunch. It was not. When conditions tighten, the cost becomes obvious. Private assets cannot be sold, resized, or reallocated. Risk cannot be cut, capital cannot be redeployed, and flexibility disappears exactly when it is needed most. This dynamic also places significant pressure on the liquid portion of portfolios. The “liquid half” is forced to shoulder the burden of providing liquidity, not just for itself but for the entire portfolio, amplifying stress in public markets and further weakening overall market liquidity.

SECTION 2: PASSIVE AT ALL-TIME HIGH

Turning to public markets, this section examines a second major trend: the rise and dominance of passive investing over active investing. In our framework it represents the second win of a Fragilizer over a Stabilizer.

2A. EVIDENCE

Over the past decade, passive investing has risen steadily while active management has experienced a sustained decline. Bloomberg Intelligence estimates that between 2010 and 2025, investors redeemed a cumulative 1 trillion dollars from active equity mutual funds alone (Fig. 2.1). A broader industry analysis by Goldman Sachs in its 2026 Global Macro Outlook found that since 2007, investors have withdrawn nearly 4 trillion dollars from active funds while allocating approximately 6 trillion dollars to passive vehicles (Fig. 2.2).

The ECB reports a similar pattern, noting that passive equity funds accounted for nearly 60 percent of total AUM in 2024.

‍

2B. CONSEQUENCES

2B.i. Technically driven valuations increase concentration

The shift to passive investment has profound technical and fundamental repercussions. From a fundamental standpoint the bottom up and micro rationale of owning a stock for its own merits is replaced by ownership for the sake of being long and tracking the index. In our view, obsessive benchmarking, particularly to the S&P 500, means that investors following a passive strategy are relatively estranged from the stock they own. The success of passive investment has been built on several pillars such as low cost, strong performance and easy implementation of a diversified exposure. While we don’t see any reason why costs of passive investment should pick up, future performance might be different from the past decade of secular bull market. Furthermore, given the extremely high level of concentration among equity indices we argue that the diversification benefits have receded.

This ECB report mentioned in 2.a highlights the risk of higher equity market concentration due to the behavior of passive funds who overweight the largest stocks to minimize the tracking error when replicating their benchmark. In short, passive investment mechanically reinforces the already extreme concentration in a small number of large stocks (cf. Box 1). In addition, the rule-based nature of passive strategies tends to concentrate liquidity around the market close, when these funds typically rebalance their holdings.

The decline of active management also reduce corrective forces to this vicious circle. Indeed, when active managers are strong, marginal pricing remains valuation-sensitive and capital is reallocated counter-cyclically, that is away from stretched large caps and toward undervalued companies. As passive share rises, this stabilization mechanics weakens, favoring market concentration.

BOX 1. Passive mechanically acting on concentration

Passive investment strategies track and replicate broad market indices rather than selecting individual stocks based on fundamentals. This means that when an investor allocates capital in a passive fund, the fund buys the index constituents proportionally to their weight in the index — often given by the market cap — hence larger firms receive more inflow than the smallest, increasing their market capitalization relative to the smaller ones. Over time, this mechanism magnifies the dominance of the largest stocks and cyclically increases the inflow in the largest caps.

The passive investment mechanics: a self-feeding loop

2B.ii Greater concentration can lead to volatility shocks

The same ECB study also shows that increased allocation to passive investment may “increase co-movement among stock returns” which translates into potentially higher volatility. More precisely, the ECB estimates that return correlation in the EURO STOXX Index increases by 0.45% for each 1% share of passive ownership (Fig. 2.3).

In last year’s update, The End of History Illusion, we highlighted the ultra-high level of concentration in equity indices. We also pointed out the apparent disconnect between the fundamental interdependence (Figure 2.6 shows the business relationship between these firms) of the AI complex and the actual low realized correlation between the stocks in this complex. Both metrics have gone worse. As shown in Figure 2.6, this complex has grown by $7 trillion since our original publication. This unprecedented level of concentration (Fig. 2.4) remains one of markets’ key vulnerabilities, especially when factoring in the ultra-low level of realized correlation (Fig. 2.5) and its potential effect on volatility (cf. Box 2).

BOX 2. The mathematical intuition: Index volatility when correlations come back

Low correlations are a key feature of the current market regime and the main source of low systemic volatility. Index volatility will rise sharply if correlation spikes, even if individual stock volatilities remain stable. Suppose indeed we have an equally weighted index with  stocks with average volatility  and average pairwise correlation . The index volatility is:

From this formula, the index becomes more volatile as correlation increases. An index such as the S&P 500 with initial single stock volatility at 35% and correlation 0.1 (current conditions) can see its volatility rise from 11% to 33% if correlation rises to 0.9, without any change to its underlying volatilities!

The rise of concentration and the level of correlation are not the only way to think about how passive can affect volatility. In A Model for Passive That Breaks the Market, Michael Green, Hari P. Krishnan and Stephan Sturm propose a stochastic model for the impact of passive share on equity index returns. The idea behind that model is to take into account the mean-reverting corrective force provided by active managers. Indeed, active investing focuses on allocating more capital when the market or a security is undervalued and decreasing the allocation when it is overvalued. This helps bring prices back toward a fundamental value when markets are away from equilibrium. In this model, the index evolves as the combination of a drift term representing the corrective mean-reverting force and a diffusion term capturing volatility. The drift is proportional to the share of active investing and the gap between market price and fundamental value; hence, as passive ownership rises, the corrective force becomes mechanically weaker. The diffusion, in particular, increases as market prices fall relative to fundamental value, thereby increasing volatility in response to market shocks and reflecting the typical behavior of higher volatility in low-price regimes. Under this model, instability in the markets becomes stronger and lasts longer because of a weaker mean-reverting corrective force.

Passive at an all-time high: herd behavior and concentration are detrimental to liquidity

As passive investing overtakes active management, technical flows increasingly dominate fundamental ones. A Fragilizer replaces a Stabilizer. Capital is allocated not because assets are attractive, but because being long has worked in the past. The consequences are clear: declining fundamental insight, rising concentration, growing complacency and higher volatility shock risk.

SECTION 3: MULTI-STRATEGY AT ALL-TIME HIGH

The battle for the soul of the long-only investment community has sifted in favor of Fragilizers. Staying on the buy-side but shifting away from long-only to now look into alternatives, we study the meteoric rise of Multi-Strategy funds and its consequential detrimental impact on Liquidity Dynamics.

3A. EVIDENCE

In their 2025 landscape of Multi-Manager Hedge Funds, Goldman Sachs concludes that large multi-strategy platforms have reached new highs in assets under management, risk deployed, trading volumes and headcount.

Over the past 15 years, their expansion has significantly outpaced the broader hedge fund industry, with multi-strategy assets growing roughly twice as fast as the rest of the sector. Far from slowing down, this momentum accelerated further in 2025, with these investor-favored funds growing about four times more than the remainder of the industry. (Figures 3.1 and 3.2)

Today, multi-manager funds account for roughly one third of hedge fund gross market value deployed in US equities and represent 37% of average daily trading volumes. (Figure 3.3 and 3.4)

This scale is supported by a substantial workforce. Around one-third of hedge fund employees now work at multi-strategy platforms, which collectively employ approximately 24,000 people.

3B. CONSEQUENCES

Multi-manager funds, supported by their consistent performance, have increasingly positioned themselves as intermediaries between hedge fund allocators and underlying portfolio managers. For the former, they remove the burden of due diligence, strategy understanding, and portfolio construction. For the latter, they eliminate the need to build institutional infrastructure, run a firm, and market a strategy. This has elevated them to a systemic force within the industry, with meaningful implications for financial markets.

A defining feature of these platforms is their strict and highly effective risk management. It allows them to rapidly scale down exposure to underperforming managers and, thanks to the breadth and diversification of strategies on their platforms, contain losses at the aggregate portfolio level.

This discipline has enabled them to navigate the past decade without major disruptions. However, at their current scale, the very risk model that underpinned their success could turn them into amplifiers of volatility in a severe or prolonged market downturn.

To be applied across a wide range of strategies, this framework must be highly standardized. This naturally fosters concentration and, ultimately, crowding. With a growing share of industry assets managed under similar models, utility functions, and risk constraints, the risk of asymmetric liquidity conditions increases. In periods of stress, many managers may attempt to exit similar positions simultaneously, amplifying market moves and exacerbating shocks.

What is even more worrisome is that the risk of a large multi-strategy pod washout is increasingly likely during periods of equity market reversal. BNP’s 2026 Hedge Fund Outlook shows that by the end of 2025, the one-year correlation between MSCI World and hedge fund performance reached 92%. At a more granular level, multi-strategy funds stand out, with correlation to equities surging to 88% in 2025, up from 28% over the 2021-2025 period. This could prove the perfect storm for an allocator’s portfolio with significant explicit and implicit equity beta.

Box 3. The butterfly effect: how a small pod unwind can trigger a broader market washout.

Consider multiple multi-strategy pods positioned in the same dislocations, a small, a medium, and a large pod. Each receives capital and risk limits according to its size, with larger pods allocated more capital and wider risk limits. Given that all three target the same dislocation, a liquidation of the smaller pod can trigger a chain reaction with consequences for larger pods and ultimately systemic market impact if the largest pod or pods are liquidated.

The rise of multi-strategy funds is increasing the risk of large-scale market dislocations and making markets more fragile.

Gradually replacing independent hedge funds, multi-strategy platforms have become the new systemic middleman between allocators and portfolio managers. Their success, built on diversification, margin efficiency, and tight risk management, comes at a cost: reduced market resilience.

A largely homogeneous, loss-driven risk framework has replaced a previously diverse ecosystem of independent firms with heterogeneous risk appetites and reaction functions. As a result, the risk of coordinated unwinds across multi-strategy funds has risen materially and is becoming harder to ignore.

SECTION 4: NON-COMMITTED LIQUIDITY PROVIDERS AT ALL-TIME HIGH, COMMITTED AT ALL-TIME LOW

The hedge fund industry is not the only one being reshaped by new entrants from the Fragilizer family. The market-making ecosystem has also seen the rise of new titans, steadily capturing large portions of the business once dominated by traditional liquidity providers and market Stabilizers

In this section, we examine the rise of market makers and quant funds, which we classify as non-committed liquidity providers, alongside the relative decline of banks as committed providers of liquidity.Once again, Liquidity Dynamics emerges as the primary casualty of this shift in market structure.

4A. EVIDENCE

The rise of market makers and the relative decline of banks are two sides of the same coin. Following major regulatory shifts, market makers rapidly stepped into the businesses that banks were forced to retreat from. This has created a tightly knit relationship between the new and old Wall Street titans, with potentially dangerous channels of contagion running through lending and prime brokerage services.

4A.i. Non-committed liquidity providers at all-time high

For the purpose of this paper, we classify market makers and quant funds as non-committed liquidity providers. While distinct in structure, market makers deploy their own capital whereas quant funds primarily deploy client capital, they share a critical feature: their provision of liquidity is opportunistic rather than committed. What appears to enhance liquidity in normal conditions can quickly evaporate under stress, in stark contrast to how banks provide liquidity.

Market makers have become central to modern financial markets, yet they operate with limited transparency and accountability. Unlike banks, which are deeply embedded in the real economy through lending and continuous intermediation, market makers can withdraw from markets almost instantly, with minimal reputational or regulatory consequences.

Quant funds further amplify this dynamic. Through high-frequency and systematic strategies, they often account for a significant share of daily trading volumes. But unlike banks, which monetize intermediation, quant funds monetize signals. When volatility rises and signals break down, liquidity is no longer provided, it is withdrawn.

Historically, trading was dominated by major investment banks, which acted as counterparties and liquidity providers for both institutional and retail investors. Post-crisis regulation, combined with the electronification of markets, created space for specialized electronic market makers to expand aggressively. Their revenues are now comparable to the trading divisions of leading global banks. As illustrated in Fig. 4.1, the combined revenue of Jane Street and Citadel represents nearly one third of the total trading revenue generated by the five largest US investment banks.

This shift is also reflected in broader industry data. According to the Boston Consulting Group’s Capital Markets & Investment Banking Update for 2024 and 2025, Non-Bank Liquidity Providers (NBLPs) — a category that includes market makers and proprietary trading firms — now account for roughly one quarter of the global market revenue pool, up from 12 percent in 2018 (Fig. 4.2).

The domination of market makers in the retail trading segment is total, as evidenced by Payment for Order Flow (PFOF) disclosures displayed in Figure 4.3. Under this system, market makers compensate retail brokers for directing client orders to them, generating revenue through the resulting market-making activity. This practice has raised concerns, particularly around potential conflicts of interest in which brokers may prioritize PFOF revenue over securing the best execution price for their clients. Reflecting these concerns, PFOF will be prohibited in the European Union from 2026 onwards (source: ESMA).

Quant funds have become a defining force in the new market structure, according to Bloomberg Intelligence estimates, they now account for half of the equity volume among buy-side funds, up from 25% ten years ago (Fig. 4.4). Their growing footprint creates the impression of abundant liquidity, but this liquidity is conditional and highly pro-cyclical. far more fragile than headline volumes suggest.

4A.ii. Committed liquidity providers at all-time low

In the aftermath of the 2008 crisis, banks faced substantially higher regulatory requirements and are now far better capitalized than they were twenty years ago. Although they remain key providers of liquidity and funding, stricter regulation has limited their ability to conduct certain activities. One example of increased scrutiny is the UMR regulation, which has impacted banks’ abilities to trade in OTC derivatives and has allowed new entrants to grab some of this business (see Box 4 below). Overall, non-bank financial institutions (NBFIs) have stepped in to fill the gaps left by banks and now account for the largest share of financial system assets on record. The rise of market makers and multi-strategy hedge funds, discussed earlier, illustrates how rapidly NBFIs have expanded into areas once dominated by banks.

Box 4. UMR: A multi-year regulatory calendar deeply affected OTC trading

Designed in the aftermath of the 2008 financial crisis, the UMR framework was intended to make banks’ OTC derivatives trading more resilient to counterparty risk. Before its implementation, banks and their counterparties exchanged collateral or margin bilaterally under negotiated agreements. While this mitigated some credit exposure, it could still lead to significant residual risk when collateral balances grew excessively during periods of market stress.

UMR addresses this vulnerability by introducing mandatory initial and variation margin requirements once exposures exceed defined thresholds. Under this framework, counterparties must post margin to an independent third party, reducing the build-up of bilateral exposures and strengthening the overall stability of the OTC derivatives market.

Although UMR was introduced nearly two decades ago, its real impact has only materialized over the past five years, aligning closely with the period we examine and the rise of non-committed liquidity providers.

This shift is well documented in a recent report from the Bank for International Settlements (BIS). Figure 4.5 shows that across advanced economies and over the past fifteen years, the financial assets of NBFIs have grown significantly faster than those of banks relative to GDP. Figure 4.6 highlights that this expansion is largely driven by investment funds, whose assets have more than doubled relative to GDP over the same period. By contrast, more traditional institutions such as pension funds and insurance companies have grown broadly in line with global GDP.

4B. CONSEQUENCES

4B.i. The illusion of liquidity masks great risk to Liquidity Dynamics

We see an increased risk that non-committed liquidity providers may withdraw liquidity simultaneously, even if driven by different underlying reasons.

On the surface, the rise of non-bank liquidity providers can be seen as an enhancement. However, when considering that some of these providers have no clients, only counterparties, and hence no commitment, it raises the question about the sustainability of these liquidity conditions. In case of rising volatility, we believe these providers of liquidity could withdraw, if only momentarily, if they consider it to be their best course of action. Their utility function is limited to making money and making it soon. Bank utility functions are a lot more complex and balanced and include, for example, the necessity to preserve their reputation and to serve clients. They also have a much longer investment horizon.

Quant strategies trade primarily to extract information and capture signals, not to intermediate risk. As a result, they function as non-committed liquidity providers: they supply liquidity when markets are calm but tend to withdraw abruptly when volatility rises. This dynamic contributes to an illusion of liquidity, where spreads appear tight, but underlying market depth is fragile.

4B.ii. Increased complexity intensifies systemic risks

Market Makers, thanks to their colossal investment in people and technology, have stepped up to be a major liquidity provider and have gradually taken over some business from banks. Starting with the high volume / low margin part of the business, market makers have moved higher in the complexity chain and are now expanding their business to and prop trading and structured products.

According to IFR, nearly 70 percent of Jane Street’s revenues now come from proprietary trading. This shift illustrates a broader change in the business model, where market making increasingly serves as a means of extracting information rather than simply capturing bid-ask spreads (Fig. 4.7).  With market makers now active in much broader parts of the market the risk for Liquidity Dynamics is no longer contained to listed instruments but also to some more complex products across asset classes and regions.

4B.iii. Prime Brokerage: The contagion channel between non-committed liquidity providers and banks

The growing importance of NBFIs, which include market makers, is a key concern highlighted by the IMF in its 2025 Global Financial Stability Report, titled Shifting Ground beneath the Calm. As NBFIs expand, the IMF notes their increasing reliance on banks for funding, estimating that US and European banks have a combined exposure of 4.5 trillion dollars to these institutions. Figure 4.8 shows that for some US and European banks, exposures to NBFIs reach levels close to six times their Tier 1 capital. Even more troubling, banks with the highest NBFI exposures tend to rely more heavily on wholesale funding for their own liquidity needs, further increasing vulnerability in a stress scenario (Fig. 4.9).

Banks appear more solid than ever and, on the surface, seem better equipped to withstand a systemic shock. However, we believe that the nature of their interconnectedness with NBFIs and the potential channels of contagion are often misunderstood, creating a false sense of resilience. The failure of a large multi-strategy fund or a major market maker would quickly transmit stress to banks through prime brokerage relationships and related financing channels. The IMF estimates that more than 20 percent of European banks could see their CET1 ratios fall by 50 to 100 basis points if NBFIs were to come under severe stress, and roughly 50 percent could experience declines exceeding 100 basis points.

The past decades have seen the rise of market makers and quantitative firms, which we classify as Fragilizers, alongside the relative retreat of banks, which we group among the Stabilizers. This shift in the balance of power is worrisome for Liquidity Dynamics and overall market stability, especially in the event of significant stress. What concerns us is that an increasingly large and complex segment of the financial system now rests on firms with little commitment to market stability, firms that can withdraw abruptly.

Beyond liquidity provision, we also need to consider the systemic risk. It would also be misguided to assume that market makers pose low systemic risk. Their business models have moved higher up the complexity chain, and there is a real contagion channel from them to banks via lending and prime brokerage services, and then from banks to the real economy through lower lending ability.

SECTION 5: RETAIL AT ALL-TIME HIGH

Non-committed liquidity providers impress by their sheer scale, while retail investors stand out by their numbers. Together, this new group holds enough firepower to influence market direction, making payment for order flow, as illustrated in Figure 4.3, even more consequential. While retail has been a local stabilizing force locally, we explain below why we believe this group presents the characteristics of a Fragilizer.

5A. EVIDENCE

5A.i. Evidence in volumes

Retail investors accounted for 29 percent of all options activity at the end of last year, up from 23 percent at the start of 2020, according to Bloomberg Intelligence. As shown in Fig. 5.1, 60 percent of US households owned stocks in 2025, the highest level on record. Retail inflows into single stocks and ETFs also reached a ten-year high during the year (Fig. 5.2).

Retail’s influence is also evident across the options market. Retail traders have more than doubled their options activity over the past five years, with a pronounced preference for call options (Fig. 5.3). The CBOE further reports that while overall options volumes are at record highs, the average execution size is at a record low. In our view, this combination reflects the growing importance of retail investors in options markets (Fig. 5.4).

5A.ii. Prime Brokerage: The contagion channel between non-committed liquidity providers and banks

Retail’s impact is also visible beneath the surface: in derivatives pricing. A defining feature of retail options activity is the dominance of upside speculation driven by fear of missing out. Retail traders consistently express bullish views on their preferred stocks by purchasing call options. As a result, implied volatility surfaces for several US technology names have shifted from a traditional skew to a smile, with upside calls trading almost as richly as downside puts in volatility terms. Notably, i) index-option skews remain quite steep, and ii) upside calls on single stocks were historically dominated by call-overwriting programs, making the recent shift even more remarkable (Fig. 5.6 and 5.7).

5B. CONSEQUENCES

5B.i. BTD: a local stabilizer but a growing risk to Liquidity Dynamics

Retail traders can no longer be dismissed. Advances in technology, frictionless access to markets and a collective mindset amplified by social platforms have turned retail flows into a force capable of moving markets in ways that would have been unthinkable a decade ago. This dynamic accelerated during the Covid lockdowns and has persisted in a regime defined by low volatility, steadily rising asset prices, and only brief, shallow drawdowns. In such an environment, maintaining long exposure and systematically buying the dip (BTD) has been consistently rewarded.

As a result, retail investors now command more capital than ever and operate with a trading psyche deeply ingrained in this strategy. In that sense, BTD resembles a martingale: it appears reliable as long as capital is available but inevitably fails once that constraint is reached. Over a sufficiently long horizon, its expected value converges to zero. A recent illustration is the roughly $50 million loss incurred by a retail trading community following the “Captain Condor” episode (source: Morningstar).

Crucially, when this market configuration reverses, the implications for Liquidity Dynamics can be severe. The same cohort that previously provided consistent bid-side support and helped stabilize markets during shallow drawdowns can abruptly withdraw or become forced sellers. At that point, liquidity does not merely fade, it flips, adding to supply and creating highly unbalanced, fragile market conditions.

Box 5. “Captain Condor”: How a short S&P 500 volatility martingale led to a near-$50m wipeout

Despite the name, Captain Condor was no superhero. Still, he captured a sizable retail following by promoting options trading strategies to a mass audience. He sold day-trading advice to retail investors and earned his nickname from his signature trade, the iron condor. The strategy, constructed from a call spread and a put spread, profits if the underlying remains within a defined range, as shown in the payoff diagram (Fig. 5.5).

While the payoff itself is not inherently flawed, the implementation proved fatal. Followers systematically applied a martingale approach, doubling position sizes after each large move in the S&P 500. The result was a rapidly compounding short-volatility exposure that ballooned into an unsustainably large aggregate position. On the 24th of December 2025, an index move of less than 50 bp was sufficient to trigger losses of tens of millions of dollars, driven by a toxic mix of leverage, thin liquidity, and extreme position sizing.

5B.ii.       Contagion risks from Wall Street to Main Street

According to the J.P. Morgan Chase Institute and as illustrated in Fig. 5.8, the growth in retail participation extends well beyond high-income households and now includes a significant share of lower-income individuals. Excluding the temporary effects of pandemic-era fiscal stimulus, the proportion of investors with below-median income is at its highest level since the Global Financial Crisis. While the amounts invested by these households are individually small, their rising exposure raises concerns about financial resilience. Higher-income and upper-middle-income households typically have the buffers necessary to withstand market losses. In contrast, lower-income investors may lack such protection, increasing the risk that a downturn could erode lifetime savings and force meaningful reductions in consumption. In aggregate, these dynamics could affect broader economic activity and social cohesion.

Retail investors are emerging as potential Fragilizers.

We need to give credit to retail. As a group, it navigated particularly well in recent years, often with an acumen superior to most professionals. However, we bucket the retail community among the Fragilizers for at least two reasons. First, it remains largely unknown how this investor cohort will behave in a sharp and prolonged market downturn driven by a real fundamental change (i.e. a new piece of information that makes one’s view of the world change significantly) rather than driven by technical considerations (the world has not changed, only asset prices). The buy-the-dip mentality is a double-edged sword: while it has acted as a stabilizing force during short-lived corrections, in a more severe dislocation it could become a loss accelerator, amplifying rather than dampening volatility.

Second, in a true bear market, retail trading losses could have meaningful repercussions for the real economy. The wealth effect generated by the recent bull market has created a powerful virtuous circle. Households increasingly rely not only on income, but also on the additional wealth produced by rising equity markets, to support their lifestyle and consumption. This self-reinforcing cycle of higher markets and higher spending is beneficial on the way up. But an abrupt reversal could turn into a dangerous transmission mechanism from Wall Street to Main Street, with a sharp equity decline quickly translating into lower consumption and broader economic stress.

SECTION 6: SOVEREIGN AUTHORITIES’ DRY POWDER AT ALL-TIME LOW

Having examined five of the seven trends, the conclusion is clear. Fragilizers have gained ground, while traditional Stabilizers have receded. We now turn to the Stabilizers of last resort, sovereign authorities, namely central banks and governments. Here too, the picture is deteriorating. Over the past five years, their room for maneuvering has narrowed, and in some cases, their credibility has weakened.

6A. EVIDENCE

6A.i. Rising level of debts

Debt has become an unsolvable problem. There is neither political appetite nor economic capacity to reduce fiscal deficits. Running such high deficits outside of an economic crisis or wartime is unprecedented, yet discontent among the lower deciles of US households remains extremely high. The University of Michigan’s consumer sentiment index highlights a striking divergence: individuals with investment portfolios feel materially better about the economy, while sentiment among non-stockholders has fallen to its lowest level since the survey began in 1998.

The IMF estimates that both emerging and advanced economies are now exhibiting cycle-high levels of public debt relative to GDP (Fig. 6.1). Advanced Economies (AEs) have not been this indebted since the 1950s, and Emerging Market Economies (EMEs) have simply never carried such large debt burdens.

In these conditions, governments will find it increasingly difficult to rely on debt as a tool to stimulate growth or to act as a backstop in the next crisis. Markets may be unwilling to absorb the required volume of new issuance, and in many cases the remedy may prove more damaging than the problem itself. Ultimately, there are only two realistic paths out of this paradigm: inflation and financial repression.

The US fiscal deficit is now approximately 6% of GDP, reaching levels not seen since the Global Financial Crisis. An ageing population, expanding social and ecological policies, and higher defense spending have significantly increased public financing needs. Although the H.R. 1 (“One Big Beautiful Bill”) of the Trump administration was intended to reduce public spending, fiscal deficits are not expected to decline materially in the coming years. Historically, the U.S. fiscal deficit was closely correlated with economic conditions, particularly employment, yet a structural break emerged around 2015, with deficits rising despite a solid economy (Fig. 6.2).

With rising debt levels, the U.S. government is increasingly absorbing macroeconomic risk relative to private markets (Fig. 6.3). Since the Global Financial Crisis, public debt has expanded alongside a contraction in private sector leverage, a configuration that has not been observed since the 1930s and 1940s, in the aftermath of the Great Depression and WW II (source: Berenberg Markets, Unstoppable Government Debt).

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6A.ii. Erosion of central banks’ credibility

Central bank credibility has declined over the past decade, with erosion accelerating in the past five years. Years of unconventional monetary policy, including negative interest rates and quantitative easing, have been perceived by many market participants as fostering moral hazard. This new monetary regime, defined by ultra-low rates and seemingly unlimited demand for debt, has incentivized governments to expand deficits and issue unprecedented levels of debt, rather than pursue fiscal discipline and balanced budgets.

In a working paper published in 2024, the ECB notes that this credibility has eroded further after the pandemic, largely due to three key factors: first, the post-pandemic inflation surge pushed inflation far above target levels, exposing a clear failure to meet mandates. Second, central banks persistently underestimated inflation in their forecasts, damaging their reputation as reliable, expert institutions. Third, inconsistencies in forward guidance, with some banks raising rates earlier than their own guidance, weakened confidence in their communication tools. Despite this, the subsequent disinflation process proved easier than the previous one in the seventies, partly reflecting still relatively well-anchored expectations and residual trust. Overall, the ECB emphasizes that trust, rather than popularity, is fundamental to effective monetary policy, helping anchor expectations, reduce uncertainty, and shield central banks from political pressure. This trust remains fragile, difficult to measure, and increasingly challenged by structural forces such as polarization, social media, and misinformation.

6B. CONSEQUENCES

6B.i. Higher rates make new debt issuance and budget deficit more dangerous

The stronger this interconnectedness, the higher the risks to financial stability, particularly as high public debt reduces the government’s capacity to intervene in support of ailing banks. The Swiss case of Credit Suisse illustrates how strong public finances can help contain the impact of the failure of a major bank institution. Switzerland’s financial stability allowed the government to provide credible guarantees to its competitor UBS in the acquisition process, stabilizing market confidence and limiting the effects on the whole financial system.

Given the existing stockpile of debt and the current level of interest rates, governments have far less capacity to issue new debt to support the economy in the event of a recession or financial crisis. Their role as Stabilizers of last resort is therefore significantly weakened, and their ability to inject liquidity and stabilize Liquidity Dynamics in times of stress materially reduced.

6B.ii. Credibility destruction curbing central banks’ power

Central banks have significantly expanded their toolbox over the past decades. However, without credibility and trust all these tools become mostly irrelevant. In October 2025 the International Journal of Central Banking published a working paper titled Central Bank Credibility and Institutional Resilience and the conclusion drawn is clear: diminished credibility can amplify market instability, erode confidence in financial institutions, and increase the risk of disorderly adjustments, as highlighted by the growing sensitivity of markets to structural fragilities and volatility dynamics. The paper highlights three critical channels through which declining credibility weakens central banks’ effectiveness and deteriorates market conditions. First, it weakens the anchoring of expectations, increasing uncertainty and making inflation and financial conditions more volatile. Second, it reduces the effectiveness of monetary policy tools, particularly forward guidance, which relies entirely on trust to influence behavior. Third, it undermines central banks’ ability to stabilize markets in times of stress, as their actions are more likely to be questioned or ignored.

High public debt levels have implications for the yield curve, which has steepened and pushed long-term interest rates higher. Persistently rising public debt has increased concerns that inflation and financial repression may be the only way to restore debt sustainability in the long run. These concerns have increased the fear of a debasement of the US Dollar and contributed to rising demand for real assets such as gold, even in an environment of higher interest rates — marking a structural break in 2022 in the traditional relationship between interest rates and gold prices.

As discussed by the IMFs, elevated public debt levels are worsening the bank sovereign nexus, defined as the interconnectedness between a country’s banking system and the financial health of its government.

With limited dry powder remaining and reduced credibility, the potential for sovereign authorities to act as Stabilizers of last resort has decreased, with severe consequences for Liquidity Dynamics in times of crisis.

Looking across the first six trends, a clear picture emerges: Fragilizers have gained ground while Stabilizers have receded. This shift in market structure is materially weakening Liquidity Dynamics.

The risk is even more acute in a full-blown crisis, when the traditional Stabilizers of last resort may themselves face constraints in providing liquidity precisely when it is most needed. In such a scenario, interventions risk becoming counterproductive, making the existing problems even worse.

SECTION 7: LEVERAGE AT CYCLE-HIGH

We are now dealing with six trends that have moved to all-time highs. At the same time, leverage across the system is building toward local heights. This is a dangerous mix because if leverage never triggered a real crisis on its own, it always provides more fuel for the fire. It leaves Liquidity Dynamics increasingly vulnerable. This increases the risk that the next significant fundamental (real) shock triggers not only a healthy commensurate correction but also an unorderly breakdown.

7A. EVIDENCE

We find ample evidence of a broad-based increase in leverage across the financial system. Leverage can take many different shapes, which share two common characteristics: 1. It makes the actual risk look smaller than it really is. 2. It amplifies the impact of idiosyncratic shock on balance sheets, leading to contagion, and giving potential to idiosyncratic shocks to become systemic shocks. In this document we pick four very different examples to illustrate this trend but there are countless more.

7A.i. Heightened derivatization of the world

Derivatives trading is reaching new heights across every segment of the market. From 0DTE options to OTC structures, and from retail investors to banks and institutional players, activity levels are breaking records. Fig. 7.1 shows that the last three years registered the highest derivatives trading volumes ever. A major contributor to this surge is the rapid adoption of same-day expiry options (Fig. 7.2), which have attracted a remarkably broad range of market participants over the last five years.

OTC derivatives have expanded just as aggressively, in some cases even outpacing exchange-traded products. In credit markets, risk.net reports that US systemic banks saw a 20% increase in CDS trading volumes in the third quarter of 2025, with total notional protection bought and sold reaching a decade high. Interest rate derivatives remain the largest component of OTC activity; notional volumes reached 123.5 billion dollars in the second quarter of 2025 (Fig. 7.3).

This clear growth in derivative products is not, however, accompanied by the same growth in the underlying securities. In many cases, it has simply become easier to buy an option than to buy the underlying itself.

7A.ii. Increasingly complex ETFs

The derivatization of markets is not the only evidence that leverage and speculation are back to high levels. Financial engineers are creating new products and financial solutions to minimize costs and maximize returns, increasing overall complexity and favoring speculation.

In the last five years, the growth of ETFs has allowed financial engineering to move beyond large banks and institutional investors and become accessible to a broader range of individuals and institutions. We estimate that there is now 5000 ETF listed in the US, about 25% more than there are listed single stocks. A striking example of this rise is derivative-income ETFs. Bloomberg data show that over the past five years, derivative-income ETFs have been growing faster than traditional dividend ETFs (Fig. 7.5 and 7.6). Among them, autocallable ETFs, first launched in June 2025, are following the growth trend. The first product, the Calamos Autocallable Income ETF (CAIE), gathered $500 million in assets within six months, a success that encouraged other providers to launch similar products, with several now in the SEC pipeline (source: Bloomberg, CAIE: Flows and Competition). Autocallable strategies combine a bond component with the sale of downside options. Investors receive coupons if the underlying stays above a predefined barrier, but they bear losses if it falls significantly below that level. Once reserved for sophisticated investors due to their complexity, high costs and relative illiquidity, the ETF packaging is democratizing it. Leveraged ETFs also deserve a mention.

7A.iii. AI Financing overengineering at all-time high

Another example where leverage is used to mask the actual risk is evident in the AI sector. The recent sector boom is driven by massive capital expenditure to build data centers and boost computing capacities. This growth relies on more complicated vendor financing arrangements, with even circularity and a greater reliance on debt finance.

The shift towards long-term investment is visible in Figure 7.7 and 7.8. The declining forward EBITDA-Capex ratio for the Magnificent 4 (Alphabet, Amazon, Meta, and Microsoft), indicates that these firms’ investment needs grow faster than their operating income, suggesting an increase in long-term investments such as those for data centers. The decrease in FCF yield for the Magnificent 7 (Alphabet, Amazon, Meta, Microsoft, Nvidia, Apple, and Tesla), also indicates the rising difficulty of self-financing projects.

However, traditional on-balance sheet debt did not rise in proportion to the expected investment needs, as shown by Figure 7.9. This suggests that at least part of the financing comes from more complex structures that are off balance sheet. Leading companies such as Meta, Oracle and xAI are increasingly moving away from traditional financing models and adopting more complex financial engineering solutions tailored to the long-term and capital-intensive nature of AI infrastructure. A key objective of these structures is to ringfence project-specific risks rather than allowing them to affect the company’s broader balance sheet.

As reported by the Financial Times (cf. Tech groups shift $120bn of AI data centre debt off balance sheets), many tech companies are now using Special Purpose Vehicles (SPVs) to fund large-scale data-center construction. By channeling financing through SPVs, firms can isolate the risk of individual projects, protecting the rest of the business from potential downside. These arrangements have been made possible by strong investor demand, driven by expectations of exceptionally high future returns. According to the Financial Times, at least 120 billion dollars has already been raised by tech companies through SPVs with major asset managers and US banks. What has now become the norm “would have been unfathomable 18 months ago” said a senior executive at one of the large financing institutions to the FT. SPV financing also enables companies to raise additional capital more easily. Because the associated debt does not appear on the parent company’s consolidated balance sheet, it preserves borrowing capacity for further traditional debt issuance. For example, Meta reportedly secured roughly 30 billion dollars in October 2025 from asset managers and private-market institutions through an SPV, with the debt remaining off balance sheet. Only weeks later, Meta was able to raise an additional 30 billion dollars in the corporate bond market, securing the liquidity needed to fund its investment commitments.

7A.iv. Payment-in-Kind (PIK)

Another form of financial engineering increasingly common in private markets involves modifying the structure of debt rather than relocating it off the balance sheet through Payment-in-Kind (PIK) provisions. PIK allows borrowers to defer cash interest payments by capitalizing interest and adding it to the loan principal. According to Lincoln International, the share of investments incorporating PIK features has nearly doubled over the past four years, now accounting for 11% of private market investments. The report distinguishes between loans structured with PIK at origination and those that subsequently adopt PIK features — so-called “Bad PIK” — whose share has also increased (Fig. 7.10).

7B. CONSEQUENCES

7B.i. Derivatization indicated a more spectaculative mood, contributing to greater fragility

This growing reliance on derivatives represents a gradual, relentless, and profound shift in market structure. As derivatives specialists, while we welcome broader adoption of derivatives, the scale of the increase is concerning, particularly because underlying cash markets have not grown proportionally. In our view, this reflects a broader transition from fundamental-driven investing to speculative trading. Fewer investors have a deep understanding of the assets they hold; many maintain exposure primarily out of fear of missing out on further upside. This relative absence of conviction means that nothing will likely hold these positions when the mood turns, potentially creating supply-demand imbalances and deteriorating Liquidity Dynamics.

7B.ii. Heightened ETF complexity increases market fragility

Exchange Traded Funds are allowing individuals to invest and speculate on complex products without a deep understanding of them. The expansion of these strategies increases tail risk, especially during regime shifts and, in the specific case of autocallable ETFs, around barrier levels, potentially raising correlations due to the hedging strategies of ETF providers.

7B.iii. Lower transparency in AI complex financing makes debt markets more risky

The debt issued through SPVs is often repackaged into asset-backed securities (ABS), enabling the redistribution of credit risk across a broad investor base. While these instruments offer investors an opportunity to participate in large-scale data center financing, the underlying risks can be opaque, particularly for those without deep expertise in structured credit. This new financing model also creates an unusually binary risk profile for investors. The AI sector is operating under a winner-takes-all dynamic, where scale and speed are viewed as matters of survival rather than profitability. As a result, traditional economic frameworks are being set aside, and conventional risk-return assessments are losing relevance. The capital requirements for these data centers are so substantial that even the largest technology firms cannot or do not want to finance them solely through their balance sheets. With the true long-term profitability of these projects still highly uncertain, investors face risky binary outcome.

7B.vi. PIKs worsen private credit risk

In a similar vein, PIK increases overall risk by capitalizing interest. PIK provisions increase total debt, potentially altering its quality and raising effective leverage without refinancing. This practice flatters lenders’ reported income by delaying the recognition of borrower deterioration, increasing the potential impact of a sudden repricing and disguising missed interest obligations. Although it can help a company navigate a period of liquidity stress, its widespread use may create future liquidity pressure for lenders, as the reduced cash income from PIK may force them to sell other assets at a suboptimal time.

Box 6. Rising systemic leverage: are we nearing a “Minsky moment?”

The term “Minsky Moment” is derived from Hyman Minsky, a twentieth-century American economist. His core insight was that periods of stability breed complacency and should not be taken at face value; rather, the longer stability persists, the greater the risk of a severe disruption. Prolonged calm encourages leverage and excessive risk-taking, ultimately culminating in a “Minsky moment”: the point at which a seemingly stable system abruptly turns unstable, even as underlying risks have been building steadily in plain sight.

“Stability leads to instability. The more stable things become, and the longer things are stable, the more unstable they will be when the crisis hits.” – Hyman Minsky

We have previously described, in our Risk Premia Framework, how extended periods of stability can generate a self-reinforcing cycle of volatility selling. A key insight is that the longer this cycle persists, the more fragile the system becomes. This dynamic is a clear illustration of Minsky’s theory, and we believe that the seven trends examined here exhibit similar characteristics.

Cycle-high leverage reflects a highly speculative market mood will have a detrimental compounding effect on Liquidity Dynamics.

 Speculators have always played a role in market structure by contributing to healthy price discovery. The problem arises when speculators outnumber fundamental investors and begin to drive markets themselves. This shift creates a feverish environment where facts matter less than momentum, and exuberance becomes the dominant force. Market moves can be much larger and completely disconnected from economic realities. This mood continues to prevail in early 2026. We have already witnessed several episodes where participants abruptly withdrew from the market, causing asset prices to free fall. Markets feel increasingly one-sided: when prices rise too much, sellers vanish; when prices fall too much, buyers disappear. In recent weeks, we have seen multiple such liquidity vacuums across JGBs, precious metals, cryptocurrencies, and single-stock equities.

CONCLUSION

A very recent evolution

None of the seven blocks analyzed in this paper were as large during the last recession/asset drawdown (2020) as they are now. They have grown exponentially during the past five years. Naturally, it means that this market structure has produced at best two years of financial data, during which nothing significant happened. It is thus safe to say that this novel market structure has never been truly tested.

An unprecedented situation with serious implications for Liquidity Dynamics

The easiest take away is that looking in the rear-view mirror is unreliable. The mechanisms and chain of events that happened in the past have very little reason to happen in the same way in the future. It means relying on history, past data and back-tests is a flawed approach. Now, what’s the risk-reward and risk-profile of any trade from here, this is obviously the hard part. In this context, a rigorous investment process, live market structure analysis and disciplined risk management are imperative.

While markets have shown relative resilience to recent, modest volatility shocks, there is no way to predict how this new market structure would behave in a severe and prolonged crisis. What is clear is that many of the participants who have grown rapidly in recent years are Fragilizers and are far more likely to withdraw liquidity during stress than to act as shock absorbers, fragilizing Liquidity Dynamics.

Recent illustrations of fickle liquidity came in January, when the Japanese Government Bonds market experienced a sharp dislocation and a near-meltdown triggered by relatively modest trading volumes, or when silver prices faced their worst daily performance ever by free falling more than 30%.

There is no groundbreaking or completely new evidence in this paper. We’re all familiar with all these facts. What is thought-provoking, however, lies in bringing them together and examining them holistically to understand the type of market structure they collectively create. It is striking to see that each of these shifts goes in the same direction with regard to market structure (making it more fragile) and with regard to Liquidity Dynamics (worsening it).

It is possible to disagree with this conclusion. However, one cannot disagree with our analysis that this market structure is completely new and untested. It will hence necessarily react differently during the next crisis than in previous ones.

Tyler Durden Mon, 07/20/2026 - 17:40

Anduril Unveils Tiltrotor Killer Drone Straight Out Of 'Terminator'

Palmer Luckey's defense company Anduril Industries unveiled Thunder, an autonomous aircraft designed to deliver missiles, drones, electronic-warfare systems and cargo into heavily contested airspace.

"In this new era of maneuver warfare, we need eyes for what's ahead and a shield for what we can't afford to lose," Anduril wrote in a tweet.

Thunder is a Group 5 autonomous attack rotorcraft, meaning it weighs more than 1,320 pounds, as shown in the UAS classification chart below, courtesy of Piper Sandler.

Anduril noted, "A first of its kind for attack aviation. A thunderous step forward for maneuver dominance."

Thunder's modular payload bays can carry configurations including 10 air-to-ground missiles, 16 Altius-600 launched effects, or 76 70mm rockets, plus 12 counter-drone interceptors.

Pairing three Thunders with a single Apache helicopter could triple the formation's available munitions without putting additional human pilots at risk.

Anduril added, "Mass is only achievable if the platform delivering it is producible and affordable. The common dual-use baseline behind Thunder drives the economies of scale, expanded demand, and broad supply chains critical to drive down costs and de-risk the pathway to large-scale production."

X users are pointing out that Anduril just made the "tilt rotor version of the Terminator Hunter Killer drone."

So you made the tilt rotor version of the Terminator Hunter Killer drone. I guess I need to brush up on my counter Terminator skills because that reality is happening. What could possibly go wrong. pic.twitter.com/hFdmaXETj2

— John Cooke (@Marslauncher) July 20, 2026

Other folks said...

It's game over when Anduril figures out the Ornithopters pic.twitter.com/hkdtmVbkXK

— Nathan (@higgsyxh) July 20, 2026

Read:

• "Only The Beginning": How To Profit From The Asymmetric Warfare Boom

Key drone players to follow: 

Professional subscribers can find more war tech notes at our new Marketdesk.ai portal.

Tyler Durden Mon, 07/20/2026 - 17:20

Trump's Taking On 'Right To Repair': What Does It Mean?

Authored by Jacob Burg via The Epoch Times,

Questions persist over what it means for drivers to have the right to repair their cars and trucks after President Donald Trump's recent memorandum, which aims to open up access to aftermarket vehicle repairs.

Rivian R2 SUVs move down the assembly line at the manufacturing plant in Normal, Ill., on May 19, 2026. The R2 produces zero direct tailpipe emissions as a fully electric vehicle. Scott Olson/Getty Images

The June 29 memorandum impacts a slice of the controversy between auto makers, car owners, and independent workshops over who can technically and legally conduct certain auto maintenance and repair jobs. The memo specifically targets emissions components that are strictly regulated by the Environmental Protection Agency (EPA) under the federal Clean Air Act.

Automotive and legal experts who spoke to The Epoch Times explained what types of repairs the memorandum impacts, what this means for vehicle owners, and some of the potential consequences for the industry as a whole.

"What Trump's trying to do here is figure out, is there an alternative to let people basically work on their cars if it's something relating to emissions?" Joe Luppino-Esposito, federal policy director of the Pacific Legal Foundation, told The Epoch Times.

Narrow Slice Of Vehicle Regulations

Rather than establishing a national right-to-repair policy for a wide variety of aftermarket vehicle parts, the memorandum specifically homes in on components used in automotive emissions systems.

The Clean Air Act prohibits drivers from tampering with emissions systems, including intentionally removing or bypassing a catalytic converter on a vehicle that was originally equipped with one.

Additionally, if an independent repair shop wants to use a non-original equipment manufacturer part in a vehicle's emissions system, the mechanic must receive legal certification from the California Air Resources Board (CARB).

The California board is currently the only organization allowed to certify aftermarket parts under the Clean Air Act's guidelines. In many cases, the certification process can take more than a year.

Armen Hareyan, founder and editor-in-chief of the automotive industry media platform Torque News, explained that the California board is essentially the "only widely recognized way" to prove an aftermarket emissions component adheres to the Clean Air Act.

This creates a bottleneck for certifications as the board is a "state agency with limited staff handling applications from manufacturers across the entire country, not just California," Hareyan told The Epoch Times.

"That backlog has created supply shortages, driven up costs, and slowed down innovation, while also limiting how many affordable parts consumers can actually buy," he said.

"For a small aftermarket parts company, waiting over a year and paying for testing before you can legally sell a single unit is a real barrier to entering the market," Hareyan added.

The memorandum directs the EPA to issue guidance within 30 days on what actions vehicle owners can take regarding emissions repairs or modifications while staying consistent with the Clean Air Act.

Luppino-Esposito said the memorandum may result in federal guidance that allows vehicle owners some leeway with "fine-tuning" or improving their exhaust or emissions systems, for example, in ways that wouldn't violate federal law but might otherwise be restricted unless working with a dealership under the current certification process.

Existing 'Right To Repair' Laws

Some states have existing laws that provide drivers with broader right-to-repair access.

Massachusetts and Maine are the only two states that currently have comprehensive right-to-repair laws for car owners.

Under a law enacted in 2012, Massachusetts allows car owners and independent mechanics to have access to the same diagnostic data and repair information as dealers, including wireless telematics data.

Maine voters approved a similar law in 2023 that mandates standardized access to diagnostic systems and establishes a system for allowing vehicle-generated data to be shared through a secure platform authorized by owners.

Those two laws essentially give "car owners and independent shops the same access to diagnostic tools and data that dealerships get," Hareyan said.

Five additional states have broader right-to-repair laws that do not extend to motor vehicles: California, Colorado, Minnesota, New York, and Oregon.

Colorado's law applies to agricultural equipment, while the remaining four affect consumer electronics more narrowly. In California, manufacturers must give consumers access to parts, tools, and documentation for appliances and electronics, but not vehicles.

There's also the separate federal-level REPAIR Act that was introduced to Congress early last year.

Still under consideration, the REPAIR Act would give vehicle owners "access to data relating to motor vehicles of the consumers and critical repair information and tools for such motor vehicles, to provide such consumers with choices for the maintenance, service, and repair of such vehicles," according to the text of the bill.

Certification Monopoly

The memorandum also directs the EPA to "encourage the submission of, expeditiously consider, and act on any requests from organizations capable of testing aftermarket parts for conformance with the [Clean Air Act]" so that CARB is not the only organization issuing certifications.

It's not clear how this would play out or which organizations could fill the gap.

Hareyan said the Specialty Equipment Market Association, which is the leading group representing the specialty automotive aftermarket parts industry, has been advocating for years to have additional boards conduct compliance certification under the Clean Air Act.

While the association could possibly step in to become an additional certifier, the memorandum just directs the EPA to "start accepting applications from anyone qualified," Hareyan said.

"The honest answer is, we do not yet know who steps into that role, only that the door is now open," he said.

Whichever organizations are considered for compliance certification, they must have a "proposed certification process for aftermarket-emissions parts [that meets] the requirements of the [Clean Air Act] and relevant EPA regulations," the memorandum states.

Clarification Of Regulatory Policy

The last prong of the memorandum focuses on civil enforcement.

The document directs the EPA to "consider deprioritizing civil tampering enforcement actions against anyone who, in good faith, attempts to fix his or her own vehicle to its original configuration."

However, this appears to be merely regulatory guidance and likely would not serve as a legal shield to those who attempt to modify their vehicle emissions systems without the proper certification approvals under the Clean Air Act.

Rather, that section is more about changing the government's civil enforcement priorities, Luppino-Esposito said.

He compared it to the Obama-era Department of Justice changing its civil enforcement priorities over the prosecution of marijuana crimes, despite federal law remaining consistent.

"It's definitely not going to be a shield to anybody,'" Luppino-Esposito added, referring to a potential vehicle owner modifying an emissions system before getting certification approval but otherwise following federal law.

Potential Unintended Consequences

What types of repairs the EPA will eventually allow following the 30-day guidance period is unclear, especially since any policy changes must still adhere to the Clean Air Act. Repealing or altering the federal law would require an act from Congress.

It also remains to be seen if the potential federal policy changes will significantly broaden what owners can do with their vehicles, beyond ending California's effective monopoly on the certification process.

California Gov. Gavin Newsom (C) speaks as California environmental protection agency secretary Jared Blumenfeld (L), California Air Resources Board chair Mary Nichols (2nd R), and California Attorney General Xavier Becerra (R) look on during a news conference about the Trump administration's changes to vehicle emissions standards, in Sacramento, Calif., on Sept. 18, 2019. Justin Sullivan/Getty Images Tyler Durden Mon, 07/20/2026 - 17:00

"Americans Deserve To Know": State Dept. Report Details Cuban Espionage, Subversion, And Role In Rise Of Far Left

The State Department has released a new 100-page report, "Cuba: The Capital of 21st Century Communism," which is likely to land as a bombshell for much of the public. However, for ZeroHedge readers who have been paying attention, its findings are far less surprising.

"For more than six decades, the Cuban regime has been the leading sponsor of radical leftism and Third Worldism in the United States. The State Department is exposing the full history of Cuban espionage and subversion in our country," Secretary Marco Rubio wrote on X, adding, "The American people deserve to know."

For more than six decades, the Cuban regime has been the leading sponsor of radical leftism and Third Worldism in the United States.

The State Department is exposing the full history of Cuban espionage and subversion in our country.

The American people deserve to know.…

— Secretary Marco Rubio (@SecRubio) July 20, 2026

The report details Cuba's historical support for guerrillas, terrorist organizations, and revolutionary movements across the Americas. It cites Havana's relationships with the Weather Underground, Puerto Rican militant groups, Black Power organizations, and fugitives, including Assata Shakur.

It also highlights some of Cuba's most alarming penetrations of the U.S. government, including former diplomat Victor Manuel Rocha, former Defense Intelligence Agency analyst Ana Belén Montes, and former State Department official Walter Kendall Myers.

According to the report, Cuban intelligence favors ideologically motivated recruits and develops assets over decades, often beginning with students at liberal universities.

At the center of the influence network is the now-sanctioned Cuban Institute of Friendship with Peoples, known as ICAP. The organization claims more than 2,000 affiliated solidarity groups across 150 countries.

Former Cuban intelligence agents cited in the report allege that roughly 90% of ICAP personnel are connected to Cuban intelligence operations.

Recall that six and a half months ago, we identified the ICAP as a central node in Cuba's foreign subversion apparatus. We assessed that ICAP functions as the intake valve - political cover for intelligence operations designed to cultivate long-term assets rather than short-term spies.

And even created this graphic:

The DSA appears to be a "partner" of now-sanctioned ICAP.

It should now make sense why DSA leaders are promoting "destroying America from within," and that the way to do it appears to be through subversion networks empowering overeducated, useful liberal idiots.

About two weeks ago, Mark Penn, the former Clinton adviser and White House pollster, used a Wall Street Journal op-ed to sound the alarm over the rise of DSA.

Penn warned: "Lawmakers, law-enforcement agencies and journalists should investigate the DSA to see if it is being funded by foreign governments and interests."

Only last week, Secretary of State Marco Rubio, White House Deputy Chief of Staff Stephen Miller and Treasury Secretary Scott Bessent addressed 65 nations in Washington, declaring and posturing that the fight has begun on the radical left that seeks to destroy the West.  

NEW: Secretary of State Marco Rubio calls for the civilized world to unite against an "encroaching darkness," urging nations to defend what they have built and fight back against those who seek to destroy it.

"It is easy to destroy great things. It is far more difficult to make… pic.twitter.com/G14GjBSIXE

— Fox News (@FoxNews) July 16, 2026

 The report reinforces our December 2025 report, "Is There A 'Cuba Connection' Behind The Radicalization Of America's Nonprofit Left?" It lends new weight to concerns that foreign influence intersects with the US-based nonprofit sphere, far-left activist organizations, and socialist movements.

More importantly, the report shows that the State Department's counterintelligence focus is dramatically shifting toward suspected foreign subversion networks that could be embedded in dark-money-funded NGOs and far-left groups. 

 

One of the State Department's assessments is that people should not confuse Cuba's economic collapse with its ability to run foreign subversion operations. The report describes the island as a node where Russian, Chinese, and Iranian interests converge with intelligence and activist networks operating inside the U.S. 

Tyler Durden Mon, 07/20/2026 - 16:40

Democrats Dismiss Our Constitutional Traditions As 'Nostalgia'

Authored by Jonathan Turley,

Below is my column in The Hill on the latest spin from the left to convince Americans to abandon core constitutional institutions and values as part of a radical agenda in the upcoming elections. Those who defend our traditions, on the 250th anniversary of our Republic, are now being accused of being “nostalgic” rather than progressive. It is a nostalgia that will take on a truly tragic element if professors, pundits and politicians are successful in this effort.

It appears that the Madisonian democracy has joined shackets and combat boots as embarrassingly outdated for many on the left. In calling for radical changes to our constitutional system, leading Democrats are now calling the lingering loyalty to our traditions as mere “nostalgia.” To be nostalgic in today’s parlance is to be a dupe of the oligarchs and an enemy to reform.

“Nostalgia” has become the new coded term for reactionaries among Democratic figures, who are trying to convince Americans to accept radical changes to our republic after 250 years.

Kamala Harris recently insisted that opposition to ideas like packing the Supreme Court is mere “nostalgia” for a system that is no longer working. “I would caution us against talking about rebuilding with any sense of nostalgia about how things work, because even before, they weren’t working so well for a lot of folks,” she said. That “nostalgia,” according to Harris, is preventing us from doing things like packing the Supreme Court with an instant liberal majority.

California Gov. Gavin Newsom (D) last week also declared that “nostalgia is not working” and, while refusing to embrace socialism, added that “capitalism as we know it doesn’t work.”

Morris Katz, a political strategist for Zohran Mamdani, spoke to CNN’s Dana Bash about looking beyond the label of democratic socialism and instead simply to accept that “our government does not work.” They are joining socialists who have long promised revolutionary changes without “introspection, nostalgia or regret.”

It is an all-too-familiar pitch. Sixty years ago, a call to break free of “old ideas, old culture, old customs, and old habits” revolutionized a nation. That call was heard in a Chinese paper that would help lay the foundation for Mao Zedong’s bloody Cultural Revolution. Marxists had long rejected calls to preserve institutions and citizens’ rights as “nostalgia” and “sentimentality,” standing in the way of needed progress.

For the Democratic Socialist of America organization, nostalgia stands in the way of getting rid of the Senate, presidency, and the Supreme Court to fundamentally change the republic.

The effort is to condition Americans to adopt radical changes to our core institutions that professors and pundits say will guarantee Democrats never lose power again.

That is not an easy task for a people who have benefited from the oldest and most prosperous democracy for 250 years. They have to be very angry or very afraid to take such a radical course.

The Soviets understood that about the U.S. After Yuri Bezmenov, a KGB agent working in the media, defected in 1970, he revealed the four stages by which the Soviets hoped to bring about revolutionary change in the U.S. It began with undermining our institutions and values, with the help of journalists and academics.

With establishment figures lining up behind radical changes, including packing the Supreme Court, the public is hearing a constant drumbeat of how our system is broken.

Even Democratic judges are joining the chorus. Indeed, some appear to be auditioning for the slots promised by Democratic leaders to take over the court with a reliable liberal majority.

This week, the Hawaii Supreme Court issued an unhinged diatribe against the U.S. Supreme Court that abandoned any semblance of judicial restraint or decorum. It declared the majority as effectively racists, saying that “The Roberts Court sees only white.” It portrayed the court as a rogue institution that “overrides what Congress passed. It overrides what the people chose. All to serve its own ends.”

It is an opinion that would make an MS NOW host blush. But it follows a pattern on the left to get people to turn against our institutions and even against the Constitution itself.

Others are telling the public that they are being repressed by the Constitution, which must be scrapped. In a New York Times op-ed — “The Constitution Is Broken and Should Not Be Reclaimed” — law professors Ryan Doerfler of Harvard and Samuel Moyn of Yale called for the nation to “reclaim America from constitutionalism.”

In yet another New York Times editorial, Jennifer Szalai denounced  “Constitution worship” and claimed that “Americans have long assumed that the Constitution could save us. A growing chorus now wonders whether we need to be saved from it.”

Berkeley Dean Erwin Chemerinsky insists that it is time to trash the Constitution in favor of “radical changes.”

These voices are seeking to remove all of the moderating elements of our system —the safety features that have produced the world’s most successful and stable republic. They are the very constitutional elements protecting us from the tyranny of the majority, protecting us from ourselves.

Without those protections, we will unleash the self-destructive forces that have been tearing apart other democratic systems since Athens. It is our constitution that spared us from that fate. As James Madison observed, “Had every Athenian citizen been a Socrates, every Athenian assembly would still have been a mob.”

Of course, history has shown that such radical proposals ultimately produce not democracy, but what the Framers called mobocracy. If we let that happen, many Americans will indeed look back at the last 250 years with a tragic sense of nostalgia.

Jonathan Turley is a law professor and the New York Times bestselling author of “Rage and the Republic: The Unfinished Story of the American Revolution.“

Tyler Durden Mon, 07/20/2026 - 16:20

Federal Prosecutors Probe Guggenheim, Billionaire Dem Donor Walter's Insurers

Federal investigators are taking a closer look at billionaire Mark Walter's financial empire, with criminal and regulatory inquiries now spanning Guggenheim Partners and two life insurance companies under his control, according to Bloomberg.

The investigation, which began last year, initially focused on Guggenheim's $362 billion asset management business before expanding to Delaware Life Insurance Co. and Clear Spring Life and Annuity Co., according to people familiar with the matter.

Bloomberg writes that both insurers revealed in recent regulatory filings that they were served with grand jury subpoenas in February.

Prosecutors are examining whether the companies properly disclosed private credit investments tied to affiliated businesses within Walter's network. The companies also said the Justice Department's investigation is proceeding alongside a separate SEC probe.

People familiar with the matter said the FBI seized at least one mobile phone under a search warrant last September, although it isn't clear which part of the broader investigation the device was connected to. No allegations have been filed, and investigations of this type can conclude without criminal charges or civil enforcement.

Following the subpoenas, the insurers launched an internal review that identified financial reporting "errors." Delaware Life subsequently revised its disclosures, revealing roughly $16 billion in additional affiliated private credit investments. The change increased related-party holdings to at least $17 billion, representing about 39% of invested assets, versus roughly $1.4 billion, or 3%, previously reported.

The disclosure led S&P Global Ratings to revise Delaware Life's outlook from stable to negative, while leaving its A- financial strength rating unchanged.

"TWG is aware of and cooperating with the investigation," the company said. Group 1001, the parent of Delaware Life and Clear Spring, also said:

"Our capital position and liquidity remain strong, and our financial strength ratings are unchanged."

Finally, we note that Walter has historically supported Democratic candidates and causes through his campaign contributions. Walter's personal contributions include support to the Democratic National Committee and to Barack Obama’s reelection campaign in 2011.

Tyler Durden Mon, 07/20/2026 - 15:45

Trump Orders Review Related To Climate Guidance For Federal Judges

Authored by Melanie Sun via The Epoch Times,

President Donald Trump has ordered federal officials to review conduct related to climate guidance included in a scientific reference manual for federal judges, which he described as politically biased and based on discredited science.

President Donald Trump speaks at the White House in Washington on July 6, 2026. Anna Moneymaker/Getty Images

"These Manuals have been totally discredited," Trump said in a June 19 post on Truth Social.

He was referring to a February decision by the U.S. federal judiciary to withdraw the climate science chapter of the newest edition of its "Reference Manual on Scientific Evidence."

The manual is published by the judiciary's research arm, the Federal Judicial Center, in cooperation with the National Academies of Sciences, Engineering, and Medicine, which includes the National Academy of Sciences. The National Academy of Sciences is an independent nonprofit organization chartered by Congress in 1863 that receives federal funding to provide scientific advice to the government.

The manual, in its fourth edition, was released in December.

Judges rely on the manual "in identifying issues commonly in dispute and to help judges reach an informed and reasoned assessment of those issues based on expert evidence that is faithful to the law and within the boundaries of scientifically sound knowledge," according to the Federal Judicial Center's website.

The guidance is not binding but can help federal judges and others in handling complex scientific and technical evidence.

"Our Nation's Federal Judges deserve Facts and Science, not Political Fraud and False Science on Climate," Trump wrote. "Our Taxpayers should not be funding Climate Fraud, and Judges should never have relied upon it."

The president said the manual would be reviewed by federal suspension and agency debarment officials for political bias.

Political Bias

The decision to withdraw the chapter titled "Reference Guide on Climate Science" was in response to complaints by 27 Republican state attorneys general, who argued the guidance was not "independent" or "impartial" as it declared that "only one preferred view is 'within the boundaries of scientifically sound knowledge.'"

In their Jan. 29 letter, the attorneys general - led by West Virginia Attorney General JB McCuskey - argued the chapter "places the judiciary firmly on one side of some of the most hotly disputed questions in current litigation: climate-related science and 'attribution.'"

They said the authors, Jessica Wentz and Radley Horton, limited their expert consultations to those who aligned with their conception of consensus, citing experts from the U.N.'s Intergovernmental Panel on Climate Change (IPCC) but not experts from the U.S. Department of Energy.

"By predetermining scientific underpinnings, the Manual effectively prejudges federalism questions that should be resolved through litigation. That sounds nothing like a 'dispassionate guide,'" they said.

"If the Center can predetermine scientific questions in climate cases, what prevents it from doing the same for pharmaceutical liability, election disputes, or Second Amendment cases? The precedent is dangerous regardless of one's views on climate change."

They also said that the section was "rife with methodology issues," that the authors and Columbia University were supportive of climate-related litigation, and that the chapter "seems intended to ensure that the judiciary will continue to accept their views uncritically."

Trump said in his post that the manuals "were used by Judges to decide massive 'Climate Change' Cases, and have created huge losses across our Country."

Wentz and Horton told the federal judiciary in a Feb. 25 letter defending their chapter: "The anthropogenic origin of climate change is the only scientific finding on climate change that the chapter presents as a 'settled' fact. The chapter does not suggest that other aspects of climate science have been 'unequivocally' established."

They said the chapter acknowledges that there are varying degrees of "scientific uncertainty and confidence with regards to the detection attribution, and projection of different types of climate impacts."

It does not "take a position as to whether specific impacts or injuries (of the sort that would be at issue in a lawsuit) are definitively attributable climate change," they added.

The manual "explains scientific approaches and explores scientific uncertainties and limits," Supreme Court Justice Elena Kagan wrote in the foreword. "It aids in assessing the uses - and the misuses - of scientific and other technical evidence. ... Yet case in and case out, the instruction that the manual offers in scientific principles and methods can improve the quality of judicial decision making."

The National Academy of Sciences did not immediately respond to a request for comment on Trump's statements and the announced review.

Tyler Durden Mon, 07/20/2026 - 15:25

Biden-Appointed Judge Rules Former FEMA CFO's Firing Over Luxury Hotels For Illegals Was Unlawful

Authored by Troy Myers via The Epoch Times,

A federal judge ruled on Friday that a former FEMA chief financial officer was illegally fired by the Trump administration over what it claimed were millions spent by the agency on luxury hotels for illegal immigrants in New York City.

Mary Comans’s termination in February 2025 amidd allegations of misused funds had been amplified by then-head of the Department of Government Efficiency (DOGE) Elon Musk and the Department of Homeland Security (DHS).

Biden-appointed District Judge Michael Nachmanoff decided she is entitled to a name-clearing hearing over the issue.

Nachmanoff, of the U.S. District Court for the Eastern District of Virginia, ordered that lawyers for Comans and the Trump administration confer and within 14 days submit a joint proposal outlining a process for the hearing.

The judge indicated that discovery and a full evidentiary hearing before a federal magistrate judge would be appropriate to address previous statements made by Musk, the Trump administration, and Comans’s allegations of her politically motivated termination without due process.

Lawyers from the progressive nonprofit Democracy Defenders Fund and four other firms who represent Comans called Nachmanoff’s ruling a “landmark” win in a statement.

“Mary Comans is a career public servant who had the courage to challenge the Trump regime’s unlawful termination,” attorney Craig Becker of Democracy Defenders Fund said. “Today’s decision is a resounding victory for the rule of law and our vital civil service. It sends a clear message that no administration is above the law, no public servant should be punished for doing their job with integrity, and no president can erase decades of civil service protections.”

Comans and her attorneys argued she was fired without due process, in violation of the Constitution, depriving her of both property and liberty.

They alleged that her notice of termination stated no official reason and was also in violation of the Civil Service Reform Act, which provides protection for federal employees.

“This is a reminder that our federal courts remain an essential check on executive abuse of power, and we will continue our fight to remedy the full scope of the harm that the president has done to our civil service,” Becker said.

President Donald Trump has fired many government employees during his second term in office. The administration has said Trump’s constitutional ability to fire federal workers cannot be constrained.

In Comans’s firing, the Trump administration said it was allowed to terminate her employment with FEMA under Article II of the Constitution, which endows a president with executive power.

DHS accused Comans and three other FEMA officials of authorizing a $59 million payment to fund housing for illegal immigrants in luxury hotels in New York City.

Homeland Security said the former CFO and others circumvented “leadership to unilaterally make egregious payments.”

The nearly $60 million payment was uncovered by DOGE.

“That money is meant for American disaster relief and instead is being spent on high-end hotels for illegals!” Musk wrote on X at the time.

The Supreme Court ruled last month on the president’s firing power. It could play a role in the upcoming hearing between Comans and the Trump administration.

The justices on June 29 both expanded and limited Trump’s ability to fire heads of federal agencies.

One case before the high court was a victory for Trump, with the justices allowing him to fire a member of the Federal Trade Commission. But in another case, the Supreme Court blocked the president’s firing of a Federal Reserve board member, sending the issue back to lower courts.

FEMA is an agency within Homeland Security, which falls under the executive branch of the federal government.

Neither the Department of Justice, FEMA, nor DHS responded to requests for comment before publication.

Tyler Durden Mon, 07/20/2026 - 14:50

30-Year Fixed-Rate Mortgage Reaches Highest Level In Almost A Year

Authored by Naveen Athrappully via The Epoch Times,

The average weekly rate on a 30-year fixed-rate mortgage is at its highest level in nearly a year, contributing to elevated housing costs and dampening buyer interest.

A home for sale in Alhambra, Calif., on Aug. 28, 2025. Frederic J. Brown/AFP via Getty Images

For the most recent week, the mortgage rate was at 6.55 percent, according to a July 16 statement by Freddie Mac. This is the highest level since the week ending Aug. 27, 2025, when the rate was at 6.56 percent. Since mid-May, rates have consistently hovered around 6.5 percent.

Rates have risen consecutively over the past two weeks, from 6.43 percent for the week ending July 1 to 6.55 percent currently.

Meanwhile, pending home sales in the country declined 2.2 percent for the four weeks ending July 12 compared to the four-week period ending July 5, according to a statement from real estate brokerage Redfin.

First-time homebuyers are facing a "tough time" breaking into the housing market, Christine Kooiker, a Redfin Premier agent in Grand Rapids, Michigan, said in the statement.

"High mortgage rates mean that even homes in the most affordable price point - under $350,000 in the Grand Rapids area - are a stretch for a lot of buyers, and they're hard to find and competitive," Kooiker said.

Many buyers are "sitting on the sidelines, too, because they're locked into low mortgage rates or can't find a new home they love."

Similar findings were made by the National Association of Realtors (NAR), which, in a July 16 statement, reported a 5.4 percent month-over-month dip in pending sales in June.

The decrease was most pronounced in the Midwest, followed by the West, South, and Northeast.

"The highest mortgage rates in nearly a year and the record-high national median home price together are contributing to a tepid housing market that is especially difficult for first-time homebuyers," NAR Chief Economist Dr. Lawrence Yun said in the statement.

Housing Affordability

Lawmakers have taken action to ease the burdens on prospective homebuyers and make housing more affordable for Americans.

On July 11, the 21st Century ROAD to Housing Act became law. The legislation aims to ensure housing affordability through various measures, such as rolling back permits and regulations, and offering financial support to homebuyers, builders, and state and local governments.

The bill was passed by the House and Senate last month. However, President Donald Trump refused to sign the bill until the election integrity bill, the SAVE America Act, was passed by Congress.

According to Article I of the U.S. Constitution, if a bill is not returned by the president within 10 days after being presented, it shall become law. Trump's deadline to veto the bill was July 10.

The bill "will cut red tape, lower costs, and boost the supply of housing," Rep. Sam Liccardo (D-Calif.) said in a July 13 statement.

"We need to build on this momentum and keep rolling up our sleeves to tackle the housing crisis confronting far too many American families."

Meanwhile, builder confidence in the market for newly built single-family homes declined in July from the previous month, according to a July 16 statement from the National Association of Home Builders (NAHB).

The NAHB/Wells Fargo Housing Market Index was at 36 in July, the 15th straight month it has remained below the 40 level. This is the longest stretch of monthly values below 40 since 2012.

NAHB chief economist Robert Dietz cited housing affordability as the "primary challenge" facing the home building industry.

NAHB chairman Bill Owens said that many potential buyers continue to hesitate to purchase homes as they wait for mortgage rates to come down and for more clarity on inflation and the economic outlook.

While the 21st Century ROAD to Housing Act has some important provisions addressing obstacles faced by buyers and builders, "these reforms will take time to implement," Owens said.

Tyler Durden Mon, 07/20/2026 - 14:05

FBI Calls Incendiary Attack On Manhattan Federal Building An "Anti-Government Attack"

Summary:

• FBI Calls incident "anti-government attack on a federal facility" 
• Suspect had "ICE Off Our Streets" Sign 
• Suspect Arrested 
• FBI New York Joint Terrorism Task Force is investigating the incident
• FBI tells Fox News "an individual deployed an incendiary device" 
• Immigration agents and FBI rushed out, guns drawn, and FPS apprehended the suspect
• Explosion Hits Outside 26 Federal Plaza in Lower Manhattan

For years, left-wing political violence in the US was often treated as isolated and/or a non-issue. The Trump administration is now calling it a domestic terrorism threat.

FBI Assistant Director in Charge James Barnacle described the incident outside 26 Federal Plaza in Lower Manhattan earlier today as an "anti-government attack on a federal facility." 

Watch the suspected left-wing radical attack the federal building, which houses offices for agencies including DHS, ICE, USCIS, the FBI, and the Social Security Administration.

A low IQ suspected left-wing terrorist attempted to set a federal government building on fire before being apprehended. pic.twitter.com/rWTctxtRQd

— Breanna Morello (@BreannaMorello) July 20, 2026

Suspect identified as Andrew Arrabaca ... 

The suspect detained in connection with the incendiary device outside 26 Federal Plaza has been identified as 43-year-old Andrew Arrabaca. pic.twitter.com/r7ZAzX0EUj

— Roberto Gil (@RbtGil) July 20, 2026

Barnacle also said the suspect carried a sign reading "ICE Off Our Streets," which suggests an association with left-wing groups.

Members of the FBI Evidence Response Team collected evidence at the scene where an incendiary device was detonated outside of 26 Federal Plaza in Manhattan, New York, United States on July 20, 2026. Monday morning the incident occurred and federal authorities are investigating… pic.twitter.com/RiXBlvbxop

— Kyle Mazza (@KyleMazzaWUNF) July 20, 2026

Even The Atlantic had to recently admit there was a troubling rise in left-wing terror...

Last week, Secretary of State Marco Rubio addressed delegations from 65 nations about the alarming rise of far-left terrorism across the West.

Socialist NYC Mayor Zohran Mamdani called the incident "deeply disturbing." Yet Mamdani and his unhinged anti-American DSA-ers have pushed an increasingly hostile climate toward federal law enforcement.

Suspect Arrested

BREAKING: Suspect apprehended after incendiary device deployed outside 26 Federal Plaza in NYC, FBI reports pic.twitter.com/7sZxyan0XV

— Fox News (@FoxNews) July 20, 2026

FBI New York Joint Terrorism Task Force Investigating 

The FBI tells Fox News' Bill Melugin:

"This morning an individual deployed an incendiary device outside of 26 Federal Plaza. The individual has been taken into custody and the FBI New York Joint Terrorism Task Force is investigating the incident."

Melugin continued:

NYPD tells FOX there was a "found firearm" in relation to this event, but couldn't confirm if it was found on the suspect.

FBI statement to @FoxNews:

"This morning an individual deployed an incendiary device outside of 26 Federal Plaza. The individual has been taken into custody and the FBI New York Joint Terrorism Task Force is investigating the incident."

NYPD tells FOX there was a "found… https://t.co/bUdDbryRxC

— Bill Melugin (@BillMelugin_) July 20, 2026

The attack at 26 Federal Plaza, which houses offices for agencies including DHS, ICE, USCIS, the FBI, and the Social Security Administration, comes days after Secretary of State Marco Rubio warned of far-left terrorism across the West.

Another view:

From outside my apartment. Saw what looked like a shotgun and people running for cover behind walls. Scary sights pic.twitter.com/geMnremrKD

— DoubleDash_DigitalDash (@DoubleDash_H) July 20, 2026

Explosion Reported Outside 26 Federal Plaza In Lower Manhattan

New footage shows what appears to be a fire and a person being arrested outside 26 Federal Plaza in Lower Manhattan.

"Moment of EXPLOSION that went off outside of the 26 Federal Plaza in NYC around 8:30am this morning, with Immigration agents and FBI Rushing out guns drawn and FPS apprehending the suspect. Sidewalk has been shut down and building evacuated," FreedomNews wrote on X. 

NOW: Moment of EXPLOSION that went off outside of the 26 Federal Plaza in NYC around 8:30am this morning, with Immigration agents and FBI Rushing out guns drawn and FPS apprehending the suspect. Sidewalk has been shut down and building evacuated.

NYPD on scene confirmed it was… pic.twitter.com/aihTqsFpcN

— FreedomNews.Tv FNTV (@FreedomNTV) July 20, 2026

Notably, the building houses several federal agencies, including the Department of Homeland Security, Immigration and Customs Enforcement, the FBI, the Social Security Administration, and U.S. Citizenship and Immigration Services.

There is no additional information at this time.

Tyler Durden Mon, 07/20/2026 - 13:45

Judge Slaps A 14-Day Timeout On Paramount-Warner Bros. Mega-Merger

A federal judge just threw a wrench into one of the biggest media shake-ups in years. On Monday, U.S. District Judge Araceli Martinez-Olguin (Biden) temporarily blocked Paramount Skydance's $110 billion takeover of Warner Bros. Discovery, giving a coalition of 12 state attorneys general a short-term win in their fight to kill the deal.

The temporary restraining order lasts 14 days - half the 28 days the states had requested - and prevents Paramount from closing the transaction that would combine two historic Hollywood studios, two major streaming services (Paramount+ and Max), and significant news assets under David Ellison, son of Oracle billionaire Larry Ellison.

California Attorney General Rob Bonta, leading the charge, argues the merger would "extinguish competition" in key areas: wide theatrical film releases, big blockbuster distribution, and the market for basic cable channels. The states put numbers on it, alleging the combined company would control 27 percent of wide-release theatrical distribution, 30 percent of anticipated blockbusters, and 27 percent of the basic cable bundle. In plain terms, they say it would mean higher prices, lower quality, and less choice for theaters, cable providers, and viewers everywhere. The states claim it violates Section 7 of the Clayton Antitrust Act, the classic law aimed at stopping deals that substantially lessen competition. All 12 attorneys general are Democrats.

Paramount is firing back hard. The company calls the lawsuit one of the weakest merger challenges in modern antitrust history, notes it already has DOJ clearance plus approvals from places like Australia and China, and vows to fight vigorously. They argue the states are ignoring the brutal competitive realities of today's media landscape, where streaming giants, tech platforms, and cord-cutting have upended everything.

The DOJ signoff came after its antitrust division closed an eight-month review that examined more than two million documents - concluding the deal could strengthen competition across streaming, traditional television, and theatrical distribution. State attorneys general retain independent authority to sue regardless.

There's real urgency for Paramount: they're on the hook for a "ticking fee" of 25 cents per Warner Bros. share every quarter if the deal doesn't close by September 30. That works out to roughly $7 million a day, or more than $600 million per quarter - serious money.

• Paramount side: 114-year-old studio, Paramount+, CBS, MTV, Nickelodeon, and more.
• Warner side: 116-year-old studio, HBO, CNN, plus iconic franchises like Batman and Superman.

If it goes through, David Ellison would control an entertainment behemoth spanning film, TV, streaming, and news.

This state lawsuit is the biggest threat so far, but it's not the only one. The EU is reviewing it, the UK culture secretary is considering intervention over media concentration worries, the Writers Guild has its own antitrust suit over wages and jobs, and consumers have challenged the streaming combination (though that effort was denied an injunction).

There's also a political undercurrent. Larry Ellison has been an ally of President Trump, who has publicly pushed for new ownership of CNN and recently praised the family. David Ellison has already started shaking things up at CBS News, bringing in Bari Weiss to revamp "60 Minutes" and the evening broadcast.

For now, the merger is in limbo. Expect intense legal wrangling over the next couple of weeks as Paramount pushes to get it back on track and the states try to build their case for a longer block. In an industry already disrupted by streaming wars and cord-cutting, this battle is about who gets to dominate the next era of Hollywood and media.

Tyler Durden Mon, 07/20/2026 - 13:10

RNC Sues To Stop Non-Residents From Voting In Six States

While it seems like common sense that living in a state should be a prerequisite to voting there, the Republican National Committee is suing six states to stop them from doing so.

Fresh off a court win in North Carolina, the RNC has filed lawsuits against Arizona, Nevada, Colorado, New Jersey, Virginia, and Nebraska, each targeting a version of the same loophole. In these states, a person who has never set foot as a resident within their borders can still cast an absentee ballot there, often because a parent or legal guardian once lived in the state decades ago. 

"If you've never lived in a state, you shouldn't be voting in its elections," RNC Chairman Joe Gruters told the Daily Signal.

"The RNC already put a stop to this unconstitutional loophole in North Carolina, and we're taking Nebraska, Colorado, Nevada, and New Jersey to court to do the same," Gruters added,

"We'll keep fighting to ensure elections are only decided by legal residents."

The mechanism behind this quirk traces back to federal guidance for overseas voting. According to the Federal Voting Assistance Program website, "In some states, U.S. citizens who were born abroad—and have never resided in the United States—are eligible to vote absentee." Several states extended that logic further than Congress likely intended, allowing people who were born overseas and never lived stateside at all to vote based on a parent's old address.

The RNC is not coming after military voters or diplomats. The committee says it firmly supports the Uniformed and Overseas Citizens Absentee Voting Act (UOCAVA), the decades-old law that lets service members and foreign service officers vote from wherever the government has stationed them. To secure legal standing in each state, the RNC is partnering with the relevant state party, a candidate, or both.

The North Carolina case set the template. In June, the Wake County Superior Court struck down a state law permitting people born overseas who had never lived in North Carolina to vote there anyway, handing the RNC a win over the state elections board and establishing that these arrangements are vulnerable to a straightforward constitutional challenge.

Nevada is shaping up as the marquee fight of the current round. The RNC has joined the state Republican Party and Republican secretary of state nominee Jim Marchant in challenging a law that allows people who never lived in Nevada, and in some cases never lived in the United States at all, to vote there based solely on a parent's or guardian's past residency. The plaintiffs argue the arrangement violates Nevada's constitution, which requires voters to have "actually, as opposed to constructively" resided in the state. Constructive residency is a fittingly bureaucratic term for a system built on the honor of an ancestor's zip code.

Despite the commonsense nature of the lawsuit, Nevada Secretary of State Francisco Aguilar, a Democrat, called it "an attack on the voting rights of eligible U.S. citizens living abroad" and warned that unwinding the law could hurt military families, even though the RNC made it clear that’s not who their lawsuit is about. "They risk everything to defend our freedoms, including the fundamental right to vote, and Nevada has a responsibility to protect their access to the ballot and the rights of the families who serve alongside them,” he added.

"Children born overseas should not be punished because their parents served, worked, or were stationed outside the United States," Aguilar continued, saying, "Nevada will not turn its back on military families simply because their service took them away from home."

Despite Aguilar’s claims, the lawsuits actually target civilians with no service record and no residency claim beyond a relative's former mailing address, not the men and women stationed abroad under UOCAVA.

“People should have full faith and confidence in the system,” RNC Chairman Joe Gruters said last week. “What we want is to have elections be safe and secure. We want everybody who's eligible to vote to be able to vote. But I don't know why it's so hard. The question is, why do we have 150 lawsuits trying to make sure we protect democracy and try to make sure these elections are safe and secure? It's because the other side knows they'll do everything in their ability to hold on to power and control.”

Gruters added, “And that's why they're allowing tens of millions of illegals into the country, they want them to be able to eventually have voting rights, and so we've stopped, you know, non-citizens from voting. Some of our biggest wins is knocking them off the voting rules. But the work never ends.”

Democrats will do ANYTHING to gain power, including cheating.

That's why the RNC is fighting on the ground and in the courts across the country to secure our elections. pic.twitter.com/AuF7LR7HoC

— Chairman Joe Gruters (@ChairmanGruters) July 16, 2026

Tyler Durden Mon, 07/20/2026 - 13:00

A 28 Item Grocery Order From Target That Cost $64.50 In 2020 Now Costs $158.30

Authored by Michael Snyder via The Economic Collapse blog,

The cost of living has become absolutely suffocating for millions of Americans. For years, the bureaucrats in Washington have been feeding us numbers that show that the rate of inflation is low, but it is obvious to everyone that what they are telling us is simply not true. Many of the items that I regularly purchase at the grocery store have more than doubled in price over the past decade. Some have more than tripled in price. When I get to the register to check out, I feel like asking the cashier which organ I should donate to pay for my groceries.

We have reached a stage where grocery prices are causing extreme financial stress for families all over America. One man recently caused quite a stir on social media when he revealed that a grocery order from Target that cost $64.50 in 2020 is now $158.30 in 2026…

This post has already been viewed a million times.

The reason why it is so popular is because it instantly resonates with people.

Everyone knows that grocery prices have risen to absurd levels, and yet the statisticians in Washington keep assuring us that everything is fine.

I don’t believe them.

Do you?

The Washington Post just conducted a poll that found that 66 percent of Americans consider the cost of groceries to be unaffordable.

That figure has risen by 21 percent just since February…

Americans are feeling worse about the price of groceries than they were before the war with Iran began, a Washington Post-Ipsos poll finds.

About two-thirds, or 66 percent, of Americans say they would describe the cost of groceries as unaffordable, up sharply from the 45 percent who said the same thing in February before the conflict started.

Partisanship continues to play a big role in perceptions, with half of Republicans saying groceries are affordable in the latest poll, compared with about one-quarter of independents and Democrats.

Housing is even worse.

The median price of an existing home in the United States has now surpassed the $440,000 mark…

With a landmark housing affordability bill in political limbo, U.S. home prices have hit an all-time high.

The median price of existing homes in June was $440,660, up 1.8% from $432,700 a year ago, according to new data from the National Association of Realtors (NAR). Home prices have risen for 36 straight months.

“Housing affordability remains low under slowing wage growth and stronger home price growth,” Ershang Liang, an economist with PNC Economics Research, said in a report.

Who can afford to pay that much for a house?

Rental prices have also gone through the roof.

If you can believe it, the average rent on a one bedroom apartment in Manhattan is now a whopping $5,408 a month…

The city’s housing crisis has hit “DefCon 1” — with average rents for a one-bedroom in Manhattan hitting an all-time high of nearly $5,500 last month, and Brooklyn following suit, according to new data and critics.

“We need bold action. This is a crisis,’’ New York City Comptroller Mark Levine posted on X over the weekend, along with a link to the latest figures from the inhabit blog by real-estate giant Corcoran Group.

The dismal June stats reveal that renters paid an average of $5,408 for a one-bedroom in Manhattan, with studio prices not far behind at $4,014.

It isn’t a mystery why most Americans are struggling in this sort of an environment.

Many are turning to debt in a desperate attempt to make ends meet…

Many American families are struggling to make ends meet on their incomes alone and have resorted to credit cards, payday loans, and Buy Now Pay Later (BNPL) options for groceries, according to nonprofit research center Urban Institute.

The findings are based on a survey of 18-to 64-year-old working-age adults conducted in December 2025. About 8.7 percent of adults said they used a credit card for groceries and were unable to make the minimum payment, up from 7.1 percent in 2023, the Urban Institute said in a July 13 report. This suggests “worsening financial distress” among families.

Almost one in 10 used BNPL to pay for groceries, out of which more than a third missed a timely repayment last year.

Unfortunately, when you keep piling up debt a day of reckoning eventually arrives.

Coming into this year, alarmingly large numbers of Americans were getting behind on their credit cards…

And the number of foreclosures in the U.S. is way above the highly elevated pace that we witnessed last year…

Foreclosures across the U.S. ballooned in the first half of the year, a sign of the increasing financial strain facing the nation’s homeowners.

Foreclosure filings reached nearly 228,000 from January to June, up 21% from a year ago and 28% from two years ago, according to data released Thursday from real estate data company ATTOM.

Rising foreclosure rates indicate that more homeowners are in financial distress, Rob Barber, CEO of ATTOM, said in a statement. Homes go into foreclosure when the owner falls behind on mortgage payments, often due to extenuating life circumstances such as a job loss. ATTOM defines foreclosures as default notices, scheduled auctions or bank repossessions.

This reminds me so much of the conditions that we experienced just before the financial crisis of 2008.

Unfortunately, the cost of living is only going to go higher.

The cost of energy directly affects the cost of everything else, and it appears that the Strait of Hormuz is going to be closed for an extended period of time.

The average price of a gallon of gasoline in the U.S. has nearly reached four dollars again, and the average price of a gallon of diesel has already risen above the five dollar mark…

US gas prices have rocketed higher during the on-again, off-again war with Iran.

After a brief respite, the average price for gas has surged 15 cents in a week to $3.94 a gallon and appears headed north of $4 again. Diesel, which shows up in customers’ shipping costs, topped $5 a gallon again Thursday for the first time in 3 weeks, according to AAA.

It serves as a painful reminder of how the military conflict in the Persian Gulf has a direct effect on your wallet.

Of even greater importance is what the closure of the Strait of Hormuz means for the global fertilizer market.

As Mike Adams has pointed out, without sufficient quantities of nitrogen fertilizer we won’t even come close to producing enough food for everyone…

Admittedly, I have failed to explain the stakes clearly enough. For months, I have written about fertilizer supply chains, the Haber-Bosch process, and the vulnerability of the Strait of Hormuz. But the gravity of this crisis has not sunk in for most people. Let me put it as plainly as I can: The global population of more than 8 billion people depends on a fragile web of natural gas, oil, and downstream chemistry that took 60+ years to build on this planet. If we lose 25 percent of these critical substances, we lose 25 percent of the population. That is 2 billion people. Here is why that math is inescapable.

As I documented in my article “The Haber-Bosch House of Cards,” the single chemical reaction that fixes nitrogen from the air into fertilizer is responsible for feeding roughly half of humanity [1]. That process requires vast quantities of natural gas. The Persian Gulf region, especially Qatar and Iran, supplies much of that gas. When the Trump administration launched its war on Iran in February 2026 and the Strait of Hormuz was effectively closed, the global fertilizer supply chain began to collapse. This is not a prediction of future famine. The famine is already baked in. But it could still get a whole lot worse depending on how things go from here.

We could be facing multiple years when global food production is at depressed levels.

That means that food prices will go even higher in wealthy countries, and in poor countries there will be shortages.

Famine is one of the major trends that I am tracking, and what we are already witnessing in some parts of Africa is absolutely heartbreaking.

There is no magic button that we can press that is going to make these problems go away.

A crisis of historic proportions is now upon us, and we are still only in the very early stages of it.

Michael’s new book entitled “10 Prophetic Events That Are Coming Next” is available in paperback and for the Kindle on Amazon.com, and you can subscribe to his Substack newsletter at michaeltsnyder.substack.com.

Tyler Durden Mon, 07/20/2026 - 12:20

 

 

The transcript from this week’s MiB: Jason Wenk, Altruist founder and CEO, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube (video), YouTube (audio), and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

~~~

 

MASTERS IN BUSINESS Jason Wenk, Founder & CEO, Altruist

Hosted by Barry Ritholtz  ·  Bloomberg Radio  ·  Interview Transcript

BARRY RITHOLTZ (00:00:08): This week on the podcast, yet another extra special guest. Jason Wenk is founder and CEO of Altruist, a new artificial-intelligence-driven custodian challenging a lot of the legacy entities like Fidelity and Schwab that are stuck with all of their old hardware and software. I thought the conversation was fascinating, and I think you will also. With no further ado, my interview of Jason Wenk.

Jason Wenk, welcome to Bloomberg.

JASON WENK (00:00:50): My pleasure. Such a great intro.

BARRY RITHOLTZ (00:00:52): So I’m fascinated by the through line of your career. You are constantly focusing on creating lower-cost, tech-enabled financial advice. But I’m gonna put a pin in that and come back — I gotta start with your background. You studied computer science at Grand Valley State University. What was the original career plan? Was it technology and computers, or finance?

JASON WENK (00:01:19): No, so I’d never taken a finance class. I’d never met anybody who had money. My family never owned any stocks or mutual funds. I didn’t know what an IRA was, or even a 401(k) for that matter. But I grew up in the eighties and nineties, so I remember getting our first personal computer in the mid-nineties. The internet started to pick up a little bit of speed in the late nineties, and that was my dream — to go to Silicon Valley and work at a dot-com. You probably recall the market peaked out around 1999, and then a pretty major crash ensued.

So very accidentally, I did an internship at Morgan Stanley at 19 years old. I was a bit of an odd duck in that I took a lot of college classes when I was in high school, so I was already doing internships my first year of university. And I was presented an opportunity to move here to New York and to join Morgan Stanley. That was really my crash course in finance.

BARRY RITHOLTZ (00:02:20): And you were 19 or 20?

JASON WENK (00:02:22): Nineteen as an intern, and officially joined at age 20.

BARRY RITHOLTZ (00:02:25): What drew you to financial services instead of technology? Was it simply the dot-com implosion, and there were no jobs to be had in technology?

JASON WENK (00:02:35): I was still working in technology. My role — the internship — was productivity software; it just happened to be for a big investment bank. And then I spent about two years building different types of technology within the Morgan Stanley ecosystem. By the time I joined, they were Morgan Stanley Dean Witter, so they had this big retail wealth business. They also had prop trading and a number of other divisions, too.

So I didn’t really get too involved in personal wealth until maybe the last six months I was there, when I was put on a project. We were doing a lot of work with Morningstar, which back then was still sending out CD-ROMs to branches around the country. And if you had a big branch, that’d be hard — who had the CD-ROM? So we were just building networked versions of essentially the Morningstar database.

But I remember around that time, I was doing some pre-built prompts inside of these research platforms. And the way my mind worked, which was more around math, physics, computer science — I looked at these prompts and I thought, these are terrible prompts. In other words, the prompt would be: let’s build a screen so that financial advisors can easily build a portfolio, and the screen will be something like, find funds that have been around for five years, with turnover under 100 percent, with the same manager for five years or longer, that’s in the top quartile of their peer group. And on the surface you go, well, that seems pretty reasonable and fair — but that is no prediction of the future result. That is a terrible predictor of future outcomes. But it was sort of built as though it was a good predictor.

BARRY RITHOLTZ (00:04:18): Well, you have the data — past performance is right there. We have to do something with it.

I give Morningstar credit — they had an internal survey that more or less said, hey, don’t worry about the stars. The data shows if you just buy the least expensive fund, that’s the one most likely to give you the highest level of performance. And to their credit, they published that. I wanna say that was 2011, 2012. Really fascinating.

So you never really rotated through the departments where you’re smiling and dialing? Did you ever work as a broker?

JASON WENK (00:04:51): So I got licensed. I took the Series 7, Series 8, Series 24, Series 3 — all the classic licenses.

BARRY RITHOLTZ (00:04:58): The 24 — you wanted to be a supervisor?

JASON WENK (00:04:59): Yeah, and I’m not sure why. I was also a registered options principal — why I did that, I have no idea. Managed futures — again, not sure why I did that. But yeah, I did all of the research to understand the space, and I did go through the broker training program, sort of 2021 —

BARRY RITHOLTZ (00:05:26): 2021?

JASON WENK (00:05:27): Excuse me — 2001. Yeah, a little bit of a mistake there. And part of it was ’cause I wanted to move back to the Midwest. I think I had this romantic notion of going back home and helping people that I knew. The reality is nobody I knew had any money, so that wasn’t really going to work anyway. And really, before I even got started, I made the decision to leave and go start another business — kind of in the space, but adjacent. I didn’t do direct work with clients.

BARRY RITHOLTZ (00:05:52): So let’s talk about that. What was the first thing that you noticed in financial advice that led you to say, hey, this is broken, and I think I could use technology to build something better?

JASON WENK (00:06:04): Two things in particular. One was, around that time there was a transition from commission-based sales — brokers, if you will — to more fee-oriented financial planners. And for me, that really resonated. So this notion of, hey, can you give people more comprehensive planning advice —

BARRY RITHOLTZ (00:06:27): And be a fiduciary?

JASON WENK (00:06:28): Yeah. And also, I looked realistically at the way asset management worked, and I very much agreed with the Morningstar study that they published some 10 years later. A lot of this goes all the way back to Jack Bogle’s work. But just looking at a couple of years’ worth of research around asset management, I didn’t see a discernible benefit to stock picking or market timing. High cost, high turnover, high taxes — these things all eroded wealth. So part of me thought, well, is there a way that you can just get more people access to empirical, evidence-based investing? Maybe that also helps people do better.

The other part was accessibility. Again, I grew up in a farming town. There were no brokers, there were no bank advisors, there were no Edward Jones offices — there was really no access to advice. And I could see the direction the internet was taking us, really flattening the world. Everybody should be able to find advice and help through the internet.

So really, the first business, from an accessibility perspective — it was gonna be internet-based, it was a subscription service, and it was designed for people with 401(k)s. Because when I looked at the people I knew, that was about the closest thing they had to Wall Street, to a brokerage account — their defined contribution plan. So the idea was, let’s make it easy for people that have a 401(k) plan to get the absolute best results they can from their 401(k). And I spent almost three years building that business.

BARRY RITHOLTZ (00:08:07): This is Retirement Wealth Advisors?

JASON WENK (00:08:08): No, this is the one that doesn’t exist on my LinkedIn profile.

BARRY RITHOLTZ (00:08:12): This is before that.

JASON WENK (00:08:14): Yeah. So I spent from 2021 until 2024 —

BARRY RITHOLTZ (00:08:24): 2001 to 2004.

JASON WENK (00:08:25): 2001, yeah. Gosh, it shows how old I am. My mix-up — it only gets worse. The decades, the dates —

BARRY RITHOLTZ (00:08:30): The names. It just trends in one direction.

JASON WENK (00:08:32): Yeah. So 2001 till 2004. And honestly, when I look back at it, it was maybe a little bit too early. This was pre-robo-advisor, right? Pre-blogging — pre a lot of things that just got more people connected.

BARRY RITHOLTZ (00:08:50): Blogging was just starting around then. We went from GeoCities to things like TypePad.

JASON WENK (00:08:55): Yeah. You were a real trailblazer in that regard.

BARRY RITHOLTZ (00:08:58): It was compulsion — I had no choice. I had to.

JASON WENK (00:09:02): So look, pay-per-click advertising was just coming out. So you had things like Overture, which is kind of pre-Google, but you could buy the keyword for a phrase like “how to manage my 401(k)” for a penny, and you could be the top-ranked search. People would then land on my website, which was called Smarter Than Wall Street back then. And it would allow you to say, I work at General Motors, answer a few questions, and it would say, here’s how to allocate your 401(k). They’d get an email once a month if there was anything they should do differently. Of course, the emails never said that they should ever do anything differently.

And after about a year, I had built a pretty good-sized subscription business, but I started to have some churn, because people were like, why am I paying you every month to just send an email that says the same thing as the email the month before? And eventually I started asking people, well, what would be more valuable — sort of a churn survey, if you will. And people would say, look, if you would just do this for me, I’d pay you a lot more than 20 bucks a month. And that was really the genesis of Retirement Wealth. That’s even why it was called Retirement Wealth — because a lot of these 401(k) folks were retirement-focused.

BARRY RITHOLTZ (00:10:10): And that scaled up pretty rapidly. Was that the $4 billion advisory shop? No? So where did that go?

JASON WENK (00:10:18): So I ended up going to about 1.1 or 1.2 billion in assets. But yeah, it grew really fast. I started it in November — December of 2004 was when I got my registration — and ran that for about six years, roughly.

BARRY RITHOLTZ (00:10:34): And a billion in AUM is not insubstantial. That puts you into a category of —

JASON WENK (00:10:39): Especially back then.

BARRY RITHOLTZ (00:10:40): Yeah. Inflation-adjusted, we’re probably talking about 3 billion today. But that’s real revenue, that’s real clients. What made you say, all right, I’ve kind of done this — now let’s look at FormulaFolios?

JASON WENK (00:10:55): So I was always driven probably more by impact than by the size of assets or revenue. That company was bootstrapped. I built every single thing myself, wrote all of the code. Although the name was Retirement Wealth, it was a fairly tech-forward platform. I built my own proposal systems to really analyze the portfolio and then propose a new solution, digitized a lot of onboarding to really automate getting new clients on, and it was mostly virtual. So it was also before its time in the sense that it was built mostly from blogging, back in like the 2006-to-2010 era. It was a lot of things — it was doing well before its time.

And what ended up happening — really the catalyst to moving into the next business — was I was invited to speak at TD Ameritrade’s national conference. They were my custodian at the time. I loved the people there. They saw the unusual growth, and also that I was still in my twenties, and they thought, hey, we’d love to have you come speak and share a bit of how you’re doing what you’re doing. So I went to San Diego and I gave a session where I just said, hey, here’s how I’m getting new clients. I’m writing these blog posts — here’s the framework, how I do it. Here’s how I take these people from a stranger from the internet into a defined financial planning process, and then a defined portfolio. And it was so structured that I could then train other advisors. So I hired a few other advisors, and they came in and they could then run the process.

And at that time, a bunch of other advisors — I’d say hundreds of other advisors — started to reach out inbound: hey, how can I get access to your “system,” they would kind of call it. And the reality was, I didn’t want to hire 50 financial planners. I’ve always been a bit reclusive.

BARRY RITHOLTZ (00:12:56): You don’t wanna manage 50 people. But selling them the software — that’s a fair relationship.

JASON WENK (00:13:01): That seemed a lot better, right? So that’s where the idea was spawned — hey, maybe it makes more sense to license the software, make it easier for people to run their own business, but leveraging a lot of our technology.

BARRY RITHOLTZ (00:13:15): Was that FormulaFolios?

JASON WENK (00:13:15): Correct. Yeah.

BARRY RITHOLTZ (00:13:17): All right. And how big did that scale up to?

JASON WENK (00:13:19): It went zero to 4 billion in five years. And today it’s, I think, 14 billion or something like that.

BARRY RITHOLTZ (00:13:25): So I know that you were a programmer in college. You describe yourself as a developer and a math geek — you very much have a little bit of a hacker mentality. How did that technical — I don’t want to use the word self-identity, but just your self-perception — how did that affect your view of, here are the services that make sense for investors, for advisors, for this whole ecosystem that had been, especially in the two thousands, mostly ignored by Wall Street? It took 25 years for the fiduciary side to pass the commission-based brokerage side. So how did the technology background affect your perception of that market?

JASON WENK (00:14:10): Sure. Look, I think I’ve always been a little bit idyllic — you name your company Altruist, you probably have some generally idealistic tendencies. I think people who know me well would say I’m a bit of a macro thinker, but I don’t like working in the day-to-day weeds of most things. So for me, I’ve always thought in decades, and it wasn’t hard to look at the market in the early two thousands and say, well, this is the future. Even though, to your point, the RIA fiduciary channel back in 2004, when I started my first firm — it was maybe six to 800 billion in assets. Today it’s probably 10 trillion. So today it seems very obvious, but back then it was a relatively small part of the market. It was not obvious, maybe, to everybody.

But I looked at the demographics of the country, and there will be such a huge number of people who are going to need good-quality advice and planning. And if you think in first principles, which is a very common technology metaphor, and you have no bias about the way things had been done historically — to say, well, what is the right way to do things? — that just seemed like the obvious and only and objective future for this industry. And I wanted to be on the forefront of that.

So now, some 20-plus years later, the market is very obvious. A lot of people want to build in this space, and it’s the place that seems to be growing the fastest. That was crystal clear to me 20 years ago. And I think a lot of that comes from, again, that more first-principled, sort of Silicon Valley way of seeing the world.

BARRY RITHOLTZ (00:15:55): Coming up, we continue our conversation with Jason Wenk, founder and CEO of Altruist, discussing how he built the firm to compete with the big guys. I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio.

I’m Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My guest this week is Jason Wenk, founder and CEO of the new custodian Altruist.

So Altruist describes itself as a modern custodian — emphasis on modern — for independent financial advisors. What does that mean in the real world? This has always been such a boring, plumbing type of industry. What was broken that required your attention?

JASON WENK (00:16:45): Well, I guess the opposite of modern is not modern, and the whole rest of the industry is pretty old. If you think about most of the infrastructure that’s used by financial professionals, the majority of it is 50 to 70 years old.

BARRY RITHOLTZ (00:17:01): That’s amazing.

JASON WENK (00:17:02): And it operates on mainframes, not cloud-native platforms. So I think the starting point is — and with no disrespect, these were innovative companies 50 years ago. They’re just not that innovative today.

BARRY RITHOLTZ (00:17:16): You’re saying the electric typewriter isn’t cutting-edge anymore?

JASON WENK (00:17:19): I mean, they’re still fun to use — the click and the clack.

BARRY RITHOLTZ (00:17:21): They make a nice noise.

JASON WENK (00:17:22): Right? It feels very — it reminds me of my grandparents’ house in the nineties or something. So look, getting to the problem statements: having been in this space a long time, for the longest time I would look at the industry and go, that just doesn’t make any sense. Why do we do it this way?

BARRY RITHOLTZ (00:17:42): Again, we’ve always done it that way.

JASON WENK (00:17:43): Yeah, exactly. It doesn’t mean it’s the right way. And so some examples of that. I think it’s a bit crazy — if you’re a financial advisor or wealth manager… and I think if someone’s listening to this and they’re not one of those people, they’ll think, this is literally crazy. But this is the way it works. So first you have to have a custodian, right? This is a place where you’ll open accounts for your clients. They’ll safeguard your client assets, do all your record keeping, process trades —

BARRY RITHOLTZ (00:18:06): A trusted third party who is not managing the money. And that creates a built-in checks and balance.

JASON WENK (00:18:13): Somewhat — or it could be a built-in limitation, keeping that advisor from doing high-quality work. Which is what I sort of discovered as I peeled back the layers of the onion.

So these custodians — one would think a very simple thing they should be able to do is, let’s say you have three accounts with your financial planner. You’ve got an IRA, maybe a Roth IRA, a joint account with your partner, and you wanna know: how am I doing over the past 12 months? You’d think you could just log on to Schwab or Fidelity or Pershing or wherever and just click a button, and it would tell you that. But the reality is that you cannot get that information from your custodian. The custodian will only be able to tell you what you have today. It will give you access to your statements. The statements are not bundled at the household level. And what the custodian will tell you is that if you want that type of information, you need to buy a third-party portfolio accounting software: we’ll send them a daily file of all of your positions and transactions, that third party will reconcile all that data, and it will then allow you to run reports for your clients. And you’re gonna have to pay, depending on the size of your firm, anywhere from tens of thousands to millions of dollars for this third-party software. And this just fundamentally makes no sense at all. The custodian has all of the data. It should easily be able to reconcile that and run reports for advisors. But they can’t, and they won’t.

And you could go down this long list of things that they should be able to do, just as logic would tell you. For example, if you wanna bill a fee to your client — the client signs a fee agreement that says, I’m willing to pay my advisor 1 percent, hypothetically, and I’m willing to pay them that every quarter, calculated on the average daily balance, and bill me in arrears. Something simple. The custodian will say, that’s cool — what you need to do is, we’ll send your data to a third party, they can reconcile the data, you can then run a billing schema, it’ll create a CSV file, you can then upload that to our system, and we’ll then debit those fees from the accounts. But this whole process can take days. And by the time you go to debit those fees, sometimes a client will have had a distribution in their account, or a trade or something, and the fees get busted. It creates an account that gets overdrawn.

And fundamentally, again, there’s hundreds of these things, and you go, this makes no sense. Why is this the way things operate? This is largely the genesis of why you would build a brand-new custodian from scratch. And if you were going to build it in a modern way, you would probably make sure all of these things are just built in automatically.

BARRY RITHOLTZ (00:20:39): So that raises a really fascinating observation. Altruist first came to market 2020 — was it ’21?

JASON WENK (00:20:48): We wrote the first lines of code in January of 2019. I think we went into beta in early 2020, and then launched the product right in the heart of the pandemic, in 2020, 2021.

BARRY RITHOLTZ (00:20:58): So I remember when the firm first launched, and I remember hearing about it, and the initial reaction was — I don’t wanna say crickets, but kind of low-key: yeah, someone’s gonna disrupt these guys? We’ve got $10 trillion, we know what we’re doing custody-wise. And what started out as sort of a shrug — it didn’t take very long before there was a little bit of a freak-out. Like, wait a second, what’s going on here? They’re actually winning clients. How is this a thing? From your perch within building the company, how did you see the rest of the custodian market react to Altruist launching and just rolling out one new capability after another?

JASON WENK (00:21:48): So — and I wish I could remember where to properly attribute this — there’s a great saying: first they ignore you, then they laugh at you, then you win. So it’s not surprising, when somebody makes a big, bold declaration that they’re going to change an industry and make it better, if you are effectively a duopoly or oligopoly, as our industry was. Almost all the assets were held by, at the time, three custodians. Back then it was Schwab, Fidelity, and TD Ameritrade. TD Ameritrade, shortly after we launched, was acquired by Schwab, really making the power dynamic two companies that have 80-plus percent market share. So, respectfully, I think there’s going to be a natural rent-seeking sort of mentality from those people who are the dominant players. Why would they ever want there to be any change? Why would they want to change their cost structure? Why would they want to modernize their systems? Things were great for those companies. So you’re not surprised that some folks may have been dismissive.

But advisors never were. When we first started putting prototypes out into the public and sharing our vision, we had thousands of advisors that signed up for our waitlist, hundreds that decided to become design partners — very early design partners — to help us build the platform. And we have this very loyal base of users that are very loud about how happy they are with the product. And we’ve done this by co-creating it with the advisors. It’s not lost on me that there are literally thousands of features that you have to build to support the wealth management industry. We can’t possibly know all thousand internally, so you need to have some awesome partners that can help shine a light on what the most important things are. So yeah, in the end, I think we have more than caught their attention. I think now there’s a fairly deep-rooted fear, actually, from a lot of the bigger boys.

BARRY RITHOLTZ (00:23:51): Yeah. So you have the three big incumbents — it’s a little bit of an oligopoly of Schwab, which is now Schwab-TD combined, Fidelity, and Pershing–Bank of New York. Everybody kinda looked at them and said, there’s no way we’re going up against those behemoths. You are one of the first companies to say, we’re gonna take on the custodians, because their legacy platforms just can’t do the things that we can do at scale. How do you think about the challenges of going up against — what is Fidelity, 18 trillion? And Schwab is 12 trillion? These are monsters. Bank of New York Pershing is the oldest bank — that’s Hamilton’s bank, literally. These are not, oh, I think I could disrupt Nokia with a better product. These are just the most entrenched, well-thought-of partners for advisors. What gave you the confidence to say, we could beat them at their own game?

JASON WENK (00:24:58): I think a big part of the confidence came from that early advisor reaction. But the truth is that these companies don’t have high NPS — these aren’t companies loved by their customers.

BARRY RITHOLTZ (00:25:14): NPS — net promoter score. We do one of those surveys every year, and I know that’s become super popular everywhere the past 20 years.

JASON WENK (00:25:22): You don’t have to look very far and wide, or have too many conversations, to hear wealth managers gripe about their custodians. Again, I was running one of the largest — I think when I stepped down from FormulaFolios, at the time it was the fastest-growing RIA in the history of the entire industry. We were growing at 16,000 percent on a three-year growth rate. So it was a true rocket ship in the sense of the RIA space. And I felt tremendous pain. My biggest pain point was my custodian — onboarding new clients. They were making you download forms from a form library, populate the forms by hand, send them out via DocuSign at best, sometimes requiring wet signatures or medallion stamp signature guarantees. It was literally like going backwards in time 20 years. Meanwhile, you had companies like Robinhood, where you could download an app on your phone at 18 years old, have your account open in 30 seconds, fund it with a hundred dollars, and buy fractional shares of Berkshire Hathaway stock commission-free.

It was so obvious to me that the old way custodians had been operating — they were still charging commissions, using paper — this was definitely not the right way to do things. And if you started looking at the impact to clients: what is the impact of forcing people to use whole shares? Why would the big custodians force you to use whole shares versus fractional shares? Fractional share trading had been around for over 20 years.

BARRY RITHOLTZ (00:26:47): It’s just math. It’s not that difficult to execute.

JASON WENK (00:26:49): Correct. This isn’t even hard — it’s arithmetic, geometry, algebra, right?

BARRY RITHOLTZ (00:26:53): You’re not talking about exponential algos or anything like that.

JASON WENK (00:26:56): Precisely. But a lot of it is, you just start going, okay — and maybe this is a good tinfoil-hat theory here, but I’d say, what would the benefit to them be of not enabling fractional shares? Maybe that means more cash will be in client accounts — maybe they make half of their revenue from the cash spread, right? The net interest income on the cash that sits in client accounts. Maybe it also forces you — if you do want to use fractional shares, the only vehicle that trades in fractional shares, in other words where you can do notional, dollar-based buying, is mutual funds. And these mutual funds pay tremendous fees for distribution through these brokerage platforms. What if they are not allowing fractional shares because they really don’t want to disintermediate packaged products in general — to make things like direct securities more accessible to more people?

I just went down this rabbit hole, but the end result is, it costs investors a ton of money. You end up limiting the amount of tax benefits, you end up increasing the average client account size — so if you really want to have great efficacy in investment outcomes, you’d have to have tens of millions of dollars. And if you had fractional shares — as just one example — all of a sudden, a ton of that entrenched history goes away completely. Everybody can get access to the same type of investment strategies: individually managed accounts, lot-level tax trading so you can get the best possible after-tax outcomes. You can compress cash down to the lowest amount, so you’re reducing cash drag — this increases outcomes.

So I think in the end, if you put yourself on the right side of the client and you have time on your side, you will absolutely win. I think one of the best examples of that in our industry is Vanguard. What they did — they were laughed at for decades, a long time, and they didn’t even really reach massive scale until 25, 30 years into their journey. But again, if you just put yourself on the right side of the client — the end client — hey, we are going to do things that objectively and obviously produce better outcomes on an after-fee, after-tax, after-cash-drag basis; we’re going to provide delightful experiences with a true partnership with our advisors and clients — these things will work.

And again, I think you have to have a certain amount of craziness. One of our early investors — you might know Omani Carson, formerly known as Ron Carson.

BARRY RITHOLTZ (00:29:23): I was gonna say — Omani is his new name, his post-retirement name.

JASON WENK (00:29:26): And I love him dearly. But I remember, I met him very early in building Altruist, and we met for coffee in Venice, California, where the company was started. And Omani looks at me after I explained the company, and he’s like — pardon my French — “This is the craziest effing idea I’ve ever heard. I’m in. How do I give you money?” I think there’s a certain number of people who — when we’ve been doing this a long time, you eventually become numb to the status quo. And the status quo was totally shitty, right? It was not good for anybody.

BARRY RITHOLTZ (00:29:59): Except for the custodians themselves.

JASON WENK (00:30:00): Yeah, there was one party that really was happy with the status quo, right? And so I think as soon as we shed a little bit of light — now, there’s a ton of challenges you have to overcome, but again, there was no doubt in my mind this was gonna work when I started.

BARRY RITHOLTZ (00:30:11): You mentioned Robinhood and zero commission, which I wanna say was 2014 or 2015, and then Schwab rolled out commission-free trading in 2019. What did that shift in cost structure do to the relationship between investors and custodians, advisors and custodians? Did that change the way everybody looked at this? Or was this just, okay, I guess this is an even lower-margin business?

JASON WENK (00:30:42): So I think that’s a huge misconception. What’s interesting is that I wrote this piece in 2018, and we had one of our designers draw an infographic behind it. And it was the classic tip of the iceberg, where we showed what you see above the waterline and then what exists below the waterline.

BARRY RITHOLTZ (00:31:04): I just did one of those two weeks ago.

JASON WENK (00:31:06): It’s a pretty metaphor.

BARRY RITHOLTZ (00:31:08): It really is just so perfect — hey, here’s what you’re focusing on, but you gotta look at the things that matter even more.

JASON WENK (00:31:15): So we did this for custodians. And the thing people saw was the commission. So there was this belief — and advisors even didn’t know the facts. They would go to clients and say, hey, when you work with us and our independent third-party custodian, here’s how they get paid: they get paid $7 if you do a trade. It’s a pretty cheap, one-price —

BARRY RITHOLTZ (00:31:36): What about spreads? What about payment for order flow? I mean, the big money — the commission is just a break-even.

JASON WENK (00:31:42): A hundred percent, right. If you look at the big public companies that were in the space, maybe five to 10 percent of the revenue was from transactions, and commissions were maybe half of the transaction revenue.

BARRY RITHOLTZ (00:31:55): And that’s before we get to the float, which everybody loves.

JASON WENK (00:31:57): Correct. So there’s a ton of things that had, I’d say, historically been ignored or unknown. The biggest revelation when everybody went commission-free was that people started asking the question, well, how the heck do you make money? How does this business actually work if you’re giving away everything for free? Only then did people start to go, oh, wait a minute — that wasn’t even how you made money. That was literally just a complete smoke-and-mirrors way to fool me into believing you only made $7 a trade, when the reality was all of the real money was made by paying me 0.01 percent interest on my idle cash; making me trade whole shares, which makes me have more cash in my account than I really should; making me buy these different funds that all have a bunch of conflicts of interest through all of their various forms of 12b-1 and 15c-3 revenue-sharing agreements — just very esoteric stuff that very few people ever talk about. And to your point, on float and liquidity through PFOF — payment for order flow.

It really opened everyone’s eyes to the fact that the clearing and custody business, it turns out, wasn’t a high-scale, low-margin business at all. In fact, it was a very high-margin business, and that was just one kind of irrelevant piece that confused people into believing that was the full price of admission.

BARRY RITHOLTZ (00:33:20): I recall a couple of years ago — it was after Schwab went zero-commission, commission-free trading — I don’t remember if it was TD or Schwab, but one of the public companies, in a quarterly earnings report, 57 percent of their gross came from the float — came from what they got paid on the difference between what they were paying investors, 0.0-whatever, and the actual rate that they could generate internally. How does Altruist deal with that?

JASON WENK (00:34:00): So I think the key is doing whatever you’re doing transparently, and whenever you can, giving as much of the economics to the client. I’m a big believer in the flywheel, made popular by Good to Great, one of my favorite books. And our flywheel is: the first spoke is, invest in innovation that drives better outcomes for advisors. The second is, invest in innovation that drives better outcomes for end consumers — the end client. If we do those two things, it will drive the highest satisfaction amongst our user base. This will increase the amount of assets on our platform, which gives us the scale to invest more in innovation — which drives better outcomes for advisors, better outcomes for clients.

If you’re going to do that, you have to earn revenue, of course. But in our case, we built a very integrated wealth platform. So yes, we have custody and clearing revenue. We make money on net interest income — the float, if you will. We make some revenue on payment for order flow, but we built what’s called the Wheel order routing system. It’s 100 percent optimized to drive the best possible execution for every single client transaction. If we happen to get a better execution through Citadel or Jane Street, whomever, we might make a tiny amount — literally measured in fractions of basis points, mills. It’s the lowest amount of revenue we earn, but there is something there. We do earn money, again, on float, but we offer fractional shares, so we have the lowest cash holdings in the entire industry — people can hold virtually nothing. We also have some earnings from things like mutual funds, but we have the lowest amount of mutual funds in the entire industry, because we offer fractional shares — people can buy ETFs, they can buy individual securities. So we have very, very little in the way of rev share through fund companies. But there’s definitely money that is made at that clearing layer.

Where we’ve really innovated is that we also do all of the software layer for advisors, and we offer an asset management layer for advisors. So each component of the Altruist business is generally going to be 60 to 80 percent cheaper than if these things were bought individually. So you may recall, when I shared the story about how you go to a custodian and you say, why can’t you do my fee billing? That makes no sense — you have to buy a third-party software. We built all of these things natively, and most of them are either free or very low cost, because we have this benefit, if you will, of stacking the various forms of services that advisors and their clients need.

BARRY RITHOLTZ (00:36:26): On a modern platform.

JASON WENK (00:36:27): Correct. And we do it with, I’d say, fairly insane amounts of automation. So the knock I made on using PDFs — there’s no PDFs necessary at Altruist.

BARRY RITHOLTZ (00:36:40): You’re not exporting CSVs and then having to upload them to Claude to get a report once a quarter or a year.

JASON WENK (00:36:48): A hundred percent. You can open an entire family’s accounts, do all of their account transfers, link all their bank accounts, and do the whole thing in under two minutes. The accounts are being real-time validated, the transfers are being real-time validated — in 98-plus percent of these workflows, there’s no human being ever involved. So every time we build a new innovation or automation, we’re able to operate with a much higher amount of operating leverage than anyone else in the industry. This allows us to invest back into more innovation, which allows us to offer more services at lower price points.

So look, we earn revenue just like everyone else does. I think one interesting tidbit we don’t talk a lot about is the fact that, on the aggregate, Altruist earns more revenue than, I believe, any other RIA custodian on a per-dollar basis — meaning, per dollar on our platform, we earn more revenue than the big players. And it’s not because we charge more. In fact, we have the lowest fee schedule in the entire industry. But it’s because we do more for those advisors than just provide custody and clearing. We’re offering software and services, AI products, asset management services, automations around things like tax management and tax-loss harvesting. So because people use more surface area, we end up having more — and more diverse — revenue as a business, and we have much better operating leverage, because we have so much automation that we don’t have to hire a lot of people to actually offer this at scale. So these are a lot of the benefits of modern, right? If you build in this day and age, you’re not going to build the same way you would if you did it 50 years ago.

BARRY RITHOLTZ (00:38:17): You are earning more revenue as the custodian per dollar on the platform, yet at the same time the advisor is paying less cost per dollar on the platform — of course, because they’re not working with five or ten third-party add-ons. It’s just one turnkey solution, correct?

JASON WENK (00:38:36): Yeah, it’s material. And consumers, if they’re using the platform correctly, are getting better results as well. Because they don’t have things like cash drag, because they can be more fully invested, because they can reduce the need for third-party investment products — they can hold securities directly on the platform, reducing expense ratios — and because we have automation around tax management, they can drive down the tax consequences of investing materially. So again, it’s one of these things where it almost sounds too good to be true, right? But yes — advisors should be able to run more efficient, better businesses, we can have a great business, and consumers can win, too. That is very much a real possibility. There doesn’t have to be a loser. It’s a win ecosystem.

BARRY RITHOLTZ (00:39:20): Let’s talk about AI and automation and your platform, Hazel. I know my team loves it — everybody’s super positive about it. Is Hazel a standalone AI bet? Is it part of the long-term vision? Is it planning and custody and other services as one seamless workflow on a single platform? Tell us all about Hazel.

JASON WENK (00:39:48): So first, to answer your question: it’s very tightly integrated with Altruist, but it’s available totally separately, so really any wealth manager can use it. We have people using it all over the world, in many different industries. We have large CPA firms that are using Hazel, and obviously large financial advisory firms.

Part of the thinking here is that the Altruist business will eventually be a very large, scaled business with trillions of dollars in assets, but the total size of our industry is going to be tenfold that, right? So we don’t want to limit the power of AI to just whatever percentage of market share Altruist has — we want everybody to benefit from these innovations. And the things that are really cool with Hazel — again, it can be used by any financial advisor, or really a lot of different segments of financial services. It’s been a ton of fun to build. And a lot of what we’re doing is just taking the hardest, most laborious, non-glamorous but important work that used to be really hard to get if you didn’t have tens of millions of dollars, and we’re bringing the unit cost down to like three to five dollars. So you can do incredibly complex tax planning, and do it for, again, effectively a dollar to five dollars. This makes it accessible to everybody. And AI — people have their fears about what could go wrong, but we like to think this is a lot of the “what can go right.”

BARRY RITHOLTZ (00:41:19): Coming up, we continue our conversation with Jason Wenk, founder and CEO of Altruist, discussing how he built the firm to compete with the big guys. I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio.

I’m Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My guest this week is Jason Wenk, founder and CEO of the new custodian Altruist.

I’ve seen some crazy numbers as to what advisors manage. I don’t wanna talk about mutual funds — I wanna talk about straight-up RIAs, who are your prime clients as a custodian. Ten, 12, $20 trillion — just crazy numbers out there. What is the total addressable market there, and how much does the oligopoly — the big three — have of that total market?

JASON WENK (00:42:17): So the approximate number is 10 trillion today. It’s about 35,000 firms. Roughly half of these firms are SEC-registered investment advisors, meaning —

BARRY RITHOLTZ (00:42:27): More than a hundred million each.

JASON WENK (00:42:28): More than a hundred million. And then the other half are state-registered firms that are sub-100 million. Some of those are just new entrants — firms at their first registration that will probably mature into the SEC within a year or two. And others just operate small, independent businesses serving a loyal but small group of clients.

At the top of the market — I think Pershing oftentimes gets lumped into the big three. They don’t have much market share of the RIA segment. It’s a bit muddy, but the reason is they support all of the big broker-dealers, which usually have a companion corporate RIA, and that’s kind of how they get in here. But for true standalone RIAs, 85 percent of the assets are with just two companies: Schwab being the largest — they’re north of 50 percent market share — and then Fidelity being the second largest. So it’s your very classic disruption setup. If you were to just say, hey, what would be the recipe for disruption? You’d say: big, fast-growing market, dominated by old companies, using old infrastructure, with generally low NPS — low customer satisfaction. That is exactly the market that we are in today.

BARRY RITHOLTZ (00:43:39): Huh. Really, really fascinating. So given the fact that you got to build a clean-sheet custodian — you’re not built on this legacy hardware that can’t do all these things fast and easy — what’s the biggest take-up from advisors? Where are they still inefficient? Is it just paperwork and portfolio management? Is it tax? Is it compliance? Is it client service and disbursements? Where are the biggest advantages? Or is it just the whole thing?

JASON WENK (00:44:11): So we break this down into two elements. With Altruist, we have our core wealth business — this is the custody and the software related to custody. We started there. It’s a super big, hairy build. It just takes a long time — hundreds of thousands of engineering hours. There are no shortcuts. Very expensive, time-consuming.

BARRY RITHOLTZ (00:44:34): Was that a BHAG reference I heard?

JASON WENK (00:44:34): Oh, absolutely. This is as big and hairy as they get, right? And again, there are no shortcuts. But that infrastructure is so critical, because what it allows you to do, if it’s done the right way, is tackle all the other work. So I’ll start with the custody part. You can open accounts super fast and do all of the automation around onboarding clients. This is great, but you only onboard a client once — ideally. And so if you serve a client for 30 years, the custody part is really a pretty small part of the picture. It was a huge friction point, because it was oftentimes one of the first experiences that a client would have with their advisor. And if it was a bad experience — as it often was — it’s usually not fast, you don’t have a lot of clarity: hey, when is my transfer going to be done? Why did this thing get rejected? Why am I redoing this paperwork? So we solved a lot of the infrastructure.

Now, with our AI products — Hazel — we’re tackling the rest of the 30 years, right? So maybe there’s 5 percent or less of a client relationship that’s really connected to the custodian: you’re onboarding the client, you’re setting up rules around trading and rebalancing and tax management. But a lot of the work really is all of the one-to-one, hard-to-scale work. So you meet a new client — they’re a prospect at this point. You need to uncover a bunch of data that they have, you need to then analyze that, build a financial plan, create a proposal. Once they agree to it, then you do that onboarding, and now you have to serve that client for decades. And there are going to be all of these life events that happen, all of these emotions that these folks will live through with you. It could be massive changes in macro conditions; it could be changes to their family — whether it’s death, divorce, new children, etc. There are so many things that happen, and advisors have to be able to react — ideally, be proactive, but react to all these things — and make sure your money’s aligned at all times.

And this is where AI is incredibly powerful, where you can take a ton of that work that used to be heavily compromised… And compromise is interesting, because every advisor, whether they want to admit it or not, historically has been making compromises for their clients. And it goes one of two directions. One compromise is: I wanna save the world, I’ve got a hero complex, I’m gonna take every client under the sun. If I do that, the compromise is I can’t possibly give the highest level of quality, care, and service to every client — it’s just not possible; you can’t earn enough money and revenue from the lower end of your client base. The other compromise might be: I am not willing to compromise on the quality and service and attention, but as a result, I can only serve 50 families, and so my minimum is going to have to be $10 million or something like that. Where the compromise is, I can’t actually give my advice to as many people as I’d like to.

AI is this great equalizer. You think about all the infrastructure we built at Altruist, and you then layer on all of the agents that can do things like gather data for you, build financial plans, build tax plans, help you be incredibly responsive to client emails and questions — to build a level of intelligence across your client base that no human being could ever possibly attain. So it’s very easy to have an incredibly precise and highly personalized perspective on every unique client that you serve. So these are the things that we’re building. I think in the end, the clearing and custody business will end up becoming very agentic. These agents will be the ones who are probably logging on, if you will, and they’ll be performing functions that today humans have to log in to do. But it’s a pretty exciting time to build.

BARRY RITHOLTZ (00:48:22): Really interesting. I recall a couple of years ago — and I don’t wanna put words into anyone’s mouth, but it was the CEO of either BlackRock or Vanguard or somebody that size — was asked, what keeps you up at night? And the answer was cybersecurity and fraud. And I totally understand — no one wants to wake up one day and a billion dollars is missing. How do you integrate that into Altruist? How do you think about the human element — deepfakes and synthetic identity and voice fraud and cloning and all that stuff? What can the modern custodial platforms do that, hey, some of the big guys don’t have the integration with technology to do, to engage in this arms race against the bad guys?

JASON WENK (00:49:18): I mean, I think the biggest reason they’d have that paranoia is that they’re working on a 50-year-old tech stack. And we see this with the latest Anthropic models — you connect those models, they sit on top of some legacy infrastructure, and they’ll find hundreds of critical vulnerabilities that no human being could have ever identified, because the code base is essentially one giant monolithic code base. It is just this huge albatross that these companies have been dealing with for decades. And replatforming is really hard. If you’re already big, you’re at scale, and you’ve got tens of trillions of dollars, it is nearly impossible to replatform and go from physical, mainframe-based technology into a cloud-based infrastructure using smaller, more manageable microservices. So yeah, it’s a huge risk. If I was running a giant old bank or brokerage, I would probably have the same primary paranoia.

If you’re building today, the best defense is oftentimes a strong offense. So why not just build, again in first principles, a bunch of protocols to make it much harder for bad actors to even get in the door? And this is overstating the obvious, but just having modern multi-factor authentication and requirements for security keys — even eliminating some of the highest-risk channels; for example, phone calls are a lot easier to dupe, ironically, than a properly built multi-factor authentication program. So I think there’s a lot that will change. We don’t rest on the fact that, oh, we’re a tech company, therefore we’re impenetrable. Of course we have bad actors trying to come after our clients all the time. And I think that if you’re not building — especially AI that can help identify other AI and other bad actors — you’re in a bit of a quandary. And it’s really hard to do that if your core platform, again, has tens of millions of lines of code written in languages that honestly nobody uses and hasn’t used for decades. That is a major problem with financial services.

BARRY RITHOLTZ (00:51:29): So you’ve raised a decent amount of venture capital money. I wanna say the 2025 Series F gave you a just-under-$2-billion valuation. I think it was the Series F — I don’t remember.

JASON WENK (00:51:42): Yeah, correct. Last year.

BARRY RITHOLTZ (00:51:42): Discuss the need for capital to build out. And we’re not talking about the hyperscalers that are spending ungodly amounts of hundreds of billions of dollars — this is just a nice little startup that’s taking on a couple of big, entrenched companies and working off a clean sheet. What has the capital spend been like on the technology side?

JASON WENK (00:52:08): So we’ve raised a little over 600 million in capital over the last seven years. I don’t think we’ll need any additional capital going forward — we still have a lot of cash on the balance sheet.

BARRY RITHOLTZ (00:52:20): You’re cash-flow positive now?

JASON WENK (00:52:23): Our broker-dealer’s been profitable for about three years.

BARRY RITHOLTZ (00:52:26): Profitable — I wasn’t even talking profitable. I was just asking if you’re at least holding your head above water.

JASON WENK (00:52:31): Yeah. Well, look, in our industry, every broker-dealer’s financial records are public, so you can go look up our balance sheet — it’s not hard to find. But we still use cash on the balance sheet for R&D investments, to keep building more tools. You can imagine, if we backed off from our aggressive building of products and features, it wouldn’t be a hard business to run standalone for decades.

But there’s a serious cost to starting a custodian. Beyond the cost of building all of the technology, there are also the regulatory requirements and the capital requirements. When you run a brokerage business, every time you add a new client, a new dollar to your platform, you have to have reserve capital in your broker-dealer. And so there’s no shortcut. This is something where I tell people every now and again — they’ll ask me, hey, what would it take for someone to compete? I’d say, well, it’ll take about five years and at least $250 million just to have a shot — just to have any shot in the dark of making it. And that assumes, of course, you do it right, and what you build is somehow substantially better than anything else in the market, and you can get enough clients to run it on. But just to give yourself a shot — it’s, again, non-trivial.

And just to pick up on it, ’cause you made a comment about these sort of hyperscalers building these foundation models — I’m not so sure that when we look back in 20 years — or maybe 30 years, 40 years, 50 years, some amount of time in the future — at what were the most impactful companies that made the biggest difference for society, I’m not so sure those are the ones that we’ll be talking about. Really, I think it’ll be businesses like Altruist that we’ll be talking about, and going, wow, they have managed to unlock trillions of dollars for consumers. And that is not something that any of us can be convinced is possible with foundation models yet, at this point. All they are are money-guzzling machines that have yet to figure out how to turn inference into profits. In other words, their costs are higher than what they’re reselling their products and services for. I’m as big a fan and believer and user of AI products as anybody, but when we really start measuring impact — what changes the world — that’s very possible, but there’s nothing proven about it.

What we’re doing is very proven. You can very objectively say, if we give every single client, I don’t know, 1 percent back in economic advantage, and you scale that across trillions of dollars for decades, you can start measuring your impact in hundreds of billions of dollars. That, to me, is more than a small startup. It’s incredibly ambitious, but it’s incredibly good for humanity. I hope more people do this type of stuff.

BARRY RITHOLTZ (00:55:10): That’s Eric Balchunas’ column, which became a book — the Vanguard Effect. I wanna say it was like 2016, 2018: Vanguard has saved $2 trillion in fees for clients. I mean, that’s an insane, insane number. And you guys are looking to push into the same space.

I want to be respectful of your time. Before I jump to my favorite questions, I just have to ask one other question. You’ve built multiple businesses in the wealth management and fintech space. What’s the repeatable lesson that carries over from one to another? Or is each one a completely different animal?

JASON WENK (00:55:51): I mean, these are all pretty connected businesses. If someone looks at the evolution arc of my career, it’s sort of like each time I find a problem —

BARRY RITHOLTZ (00:56:01): Go on to the next one.

JASON WENK (00:56:02): Yeah. You kinda go, okay, well, that was an interesting problem, but this is an even bigger problem, and this is an even bigger problem. I’m curious — now, I think there’s going to be a reasonably good need for a highly specialized LLM, specifically narrowly trained for our industry. I’m not sure the big LLMs will do it, so maybe we’ll do that at some point in the future. But the point is, there’s always something that has the potential to make a bigger impact.

And one thing I’ll say — for me, I don’t spend a ton of time trying to compare what I do to what other entrepreneurs do, so I can’t really say if there’s a lesson to be learned broadly. But with each venture that I’ve been involved with, I’ve started with a pretty simple North Star, which is: I want to help people. These are all mission-driven organizations, and I’m very passionate about that. This allows you to attract other people that are also mission-driven — these are your missionaries versus mercenaries. And we have some of the most incredible people. I could never even dream of assembling a team like what we have at Altruist, but it’s because they share that same core ethos of serving clients, driving better outcomes — again, sort of being on the right side of the customer, doing things that really matter.

BARRY RITHOLTZ (00:57:18): So given that, look out five to 10 years. Where is Altruist? What are you doing? How big is Altruist at that point?

JASON WENK (00:57:28): It’s hard to predict with precision just how big, but I suspect we’ll be very large. If we look at the trajectory of the business today — again, we don’t talk a lot about our numbers publicly, so people have to sort of take Jason’s word for it — but in our first five years of operating, from when we opened our first account, we had more assets on our platform than Robinhood, Betterment, Wealthfront, Public, Stash, M1, and Acorns combined. So when people wonder, is this working? It’s scaling very, very rapidly, and it’s growing at a really, really fast pace. People sometimes don’t understand the sort of network effect you get when you serve advisors and those advisors are growing fast. Firms like yours are growing super fast, the clients are adding deposits to their existing accounts, and the market tailwind is pretty material.

BARRY RITHOLTZ (00:58:19): Fifteen percent a year for the past 15 years.

JASON WENK (00:58:20): Yeah. And it’s better for advisor clients than it is for self-directed clients. So these are all things that create enormous tailwinds for businesses like ours. So I think 10 years out, we’ll be multiple trillions in assets, serving many millions of end clients. And likely, where advisors have kind of capped out at a hundred or 125 or 150 clients, those laws of physics will sort of be removed. And I think that’s a net great thing.

BARRY RITHOLTZ (00:58:44): All right, I wanna be respectful of your time, and I’m gonna jump to our speed round — we’re gonna do these really quickly. Starting with: who are your mentors who helped shape your career?

JASON WENK (00:58:55): So, Nick was our first investor at Altruist. He was also a big supporter of me at my last company. He’s a partner at Venrock, and he’s just awesome.

BARRY RITHOLTZ (00:59:04): What are your favorite books? What are you reading currently?

JASON WENK (00:59:07): Right now I’m reading Life 3.0 by Max Tegmark. It’s a book from 2016, 2017. He’s a professor at MIT and one of the real forward, early thought leaders in AI. There are three phases of AI, and I’d say we’re in Life 2.0 right now — so, human-powered. Go read the book and you’ll find out what comes with 3.0. It’s a good one.

BARRY RITHOLTZ (00:59:33): That’s interesting. And you mentioned Good to Great. Anything else you wanna mention?

JASON WENK (00:59:37): Yeah — these are a little bit cornier, but some of the most important books for me… I’m a total math nerd, so I can live in a Max Tegmark book forever. But I had to learn a lot of soft skills to be a better entrepreneur, and I learned a lot of those from reading Seth Godin’s books. One of my favorites.

BARRY RITHOLTZ (00:59:51): Seth is great — amazing books, great blog as well. Let’s talk about what you’re listening to, streaming, or watching. What’s keeping you entertained on these cross-country flights?

JASON WENK (01:00:02): So I don’t watch much TV, although I did watch your Knicks. Congratulations.

BARRY RITHOLTZ (01:00:07): Talk about perfect timing and a fairly easy path — it was the perfect storm.

JASON WENK (01:00:14): They avoided my Pistons — I’m a Detroit Pistons fan. But yeah, I don’t watch a lot of TV. I do listen to a lot of podcasts. I listen to yours. I’m a big fan of Harry Stebbings, so 20VC is a good one I listen to quite a bit. And then I listen to Lenny’s Podcast — if you’re a tech person; Lenny is a product person who goes deep into how different tech companies are being built, especially product-led companies. So those are some things I listen to a lot.

BARRY RITHOLTZ (01:00:42): Huh, really interesting. Final two questions. What sort of advice would you give to a recent college grad interested in a career in — fill in the blank — entrepreneurship, fintech, or even financial services?

JASON WENK (01:00:55): I think in any career, I would become the most AI-forward person in your field that you could possibly be. It does not matter if you’re working in sales, if you’re working in tech, if you’re working in financial services. If you can become the person who, when you walk into the room, is the absolute master of Claude for your job function, I think that’s one of the most important things for any person. I think young people have an actual advantage there, and it’s one they should definitely be leveraging.

BARRY RITHOLTZ (01:01:25): You’re not gonna be replaced by AI — you’re gonna be replaced by someone who uses AI better than you do.

JASON WENK (01:01:30): It’s getting cliché, but it’s very true.

BARRY RITHOLTZ (01:01:33): And our final question: what do you know about the world of technology, entrepreneurship, or financial technology today that would’ve been helpful back in the two thousands when you were first ramping up?

JASON WENK (01:01:47): I mean, I don’t know that there’s necessarily some innovation that I wish I knew. I just wish I would’ve spent more time getting proximate to really high-caliber people. Now that I’m older and I’ve done a few things, I’ve gotten the chance to meet some just outstanding people. Man, if you can get close to those people early in your career, it’s just going to be such a massive accelerant, because your way of thinking is going to be so much better and sharper and inspired. That’s what I’d do.

BARRY RITHOLTZ (01:02:16): Thank you, Jason, for being so generous with your time. We have been speaking with Jason Wenk. He is founder and CEO of fast-rising custodian Altruist. If you enjoyed this conversation, well, check out any of the previous 648 we’ve done over the past 12 years. You can find those at iTunes, Spotify, Bloomberg, YouTube — wherever you get your favorite podcasts.

I would be remiss if I didn’t thank the crack team that helps put these conversations together each week: Alexis Noriega is my video producer; Anna Luke is my podcast producer; Sean Russo is my head of research. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.

 

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The post Transcript: Jason Wenk, Altruist founder and CEO appeared first on The Big Picture.

Buyers Trading In Vehicles With Negative Equity Face Record Monthly Payments: Edmunds

Authored by Rob Sabo via The Epoch Times,

The number of automobile owners trading in vehicles with negative equity continues to rise, with 29.6 percent of trade-ins in the second quarter showing more money owed on existing auto loans than the vehicles were worth, according to automotive insights platform Edmunds’s July 16 vehicle transaction report.

Negative equity also pushed average monthly payments on “underwater” trade-ins to $944 in the quarter, the highest figure on record, the report said.

That’s $167 more per month than trade-ins without negative equity considerations, and those higher loans are expected to account for an additional $16,270 in interest paid over the loan term—another record high that’s nearly $6,500 more than the average new-vehicle loan issued during the quarter.

“Consumers are incurring more debt than ever when trading in vehicles that are underwater,” said Jessica Caldwell, head of insights at Edmunds.

“Buyers who financed at 2022’s peak prices are starting to come back to trade in, and they’re bringing thousands of dollars in old debt with them. With interest rates still elevated, this is creating a costly snowball effect for consumers.”

It’s the highest number of underwater trade-ins recorded in the second quarter since 2020, Edmunds researchers noted. Trade-ins with negative equity eased slightly from the first quarter, when they tallied 30.9 percent, but they were up 3 percent from the second quarter of 2025.

The average amount of negative equity—$6,884—was a record high for the second quarter of any year, though it pulled back from the $7,183 notched in the first quarter, Edmunds researchers noted.

As buyers roll over negative equity into new auto loans, the principal amount owed on their new vehicles swells, Caldwell added. Buyers often rely on longer-term loans to lower their monthly payments, but that coping mechanism only results in a larger total interest paid over the life of the loan.

Paying down negative equity also lengthens the time it takes for automobile owners to reach positive equity in their vehicles, or the financial position where their car is worth more than the principal amount owed, the Federal Trade Commission’s (FTC) consumer advice portal noted.

It’s important for consumers to know their equity position in a vehicle before trading it in, the FTC added. Equally important, the FTC said, is to closely examine new automobile contracts for the amount of negative equity that may be rolled into new loans before signing documents at dealerships.

Negative equity positions have been on the rise since 2022, Edmunds said, when high used-vehicle prices caused by a global shortage of computer chips buffered consumers from rolling over debt from one vehicle to the next.

However, as vehicle prices normalized, more vehicle owners found themselves underwater on their loans as they attempted to upgrade their cars through new-vehicle purchases.

Vehicles with model years 2020 or newer showing the most negative equity include Toyota Tundra (-$8,929), GMC Sierra 1500 (-$8,566), Chevrolet Silverado 1500 (-$8,516), and Ram 1500 (-$,8347). However, Edmunds also lists a handful of sedans and sport utility vehicles with negative equity of $5,000 or more, including the Kia Sportage, Honda Accord, Toyota RAV4, Jeep Grand Cherokee, Nissan Rogue, and many others.

Often, negative equity is more about onerous financing structures than vehicle depreciation, said Ivan Drury, director of insights at Edmunds.

“Some of the biggest dollar losses we’re seeing are on trucks and sedans that traditionally hold their value better than most,” Drury said.

“When historically safe residual value bets are showing up underwater, it’s clear this is a financing problem, not always a vehicle choice problem. These examples are a harsh reminder that a great vehicle choice can still be completely undermined by a punishing loan structure.”

Tyler Durden Mon, 07/20/2026 - 11:40

US Gas Prices Cross Politically Sensitive $4 Level Closely Watched By Trump

The U.S. national average for a gallon of regular 87-octane gasoline has climbed back above the politically sensitive $4 threshold as U.S. military forces and Tehran enter a ninth day of tit-for-tat strikes. This level is significant because it is where fuel costs begin to alter spending and driving behavior among working-poor households, while also weighing more broadly on consumer sentiment, making it a key pressure point closely watched by the Trump administration ahead of the midterm election cycle.

Regular unleaded gasoline climbed above $4 a gallon on Monday, according to new data from the American Automobile Association, ending roughly one month below the politically sensitive threshold after the interim peace deal that temporarily eased Gulf area tensions.

With the U.S.-Iran conflict now caught in an escalation spiral and domestic retail fuel prices rising sharply, pressure on the Trump administration to pursue a diplomatic off-ramp is likely to intensify.

Brent crude futures jumped above $90 a barrel earlier - the highest since early June - but faded in European trading. There were reports earlier that Iran targeted tankers in the Hormuz chokepoint and a Kuwaiti oil facility was attacked.

Let's not forget: last week, the writing was on the wall.

• US Gasoline Prices Could Top $4 Per Gallon Within Days

Readers may recall that we detailed extensively how consumer behavior shifted when gas prices were above $4:

• Here's What Happened Inside Gas Stations When Gas Hit $4
• Here's What Happened Inside Convenience Stores When Gas Hit $4
• Energy Drinks Become Latest Casualty As Fuel Shock Shifts Consumer Behavior

We suggest readers revisit Daan Struyven, Goldman's leading commodity expert, on why gas prices are likely to remain elevated (read the note here).

Tyler Durden Mon, 07/20/2026 - 11:20

400+ Ukrainian Drones Launched On Moscow In One Of Biggest Attack Waves To Date

The Russian capital has been hit with a massive drone wave from Ukraine, which injured at least ten people - including three Chinese citizens - local authorities say.

Moscow Mayor Sergei Sobyanin has stated that more than 400 UAVs were launched toward Moscow and its suburbs overnight in one of the largest single raids since the war's start.

Reuters: Smoke billows after Ukrainian drone attacks in Podolsk, Moscow Region.

He described that most of the inbound drones were intercepted far from the capital, and that another 85 were downed as they got closer, but emerging images suggest there were some big strikes that landed. 

Russia's RT provided the following details, noting that the biggest impact was felt in the Moscow suburbs:

Two women were injured in Podolsk, while an 11-year-old girl in the Odintsovo district was diagnosed with an acute stress reaction but did not require hospitalization.

The main consequences of the raid were recorded in Podolsk, Domodedovo, and the Odintsovo urban district, Vorobyov said. Falling drones damaged several private homes and civilian infrastructure facilities and sparked multiple fires, he added.

In Odintsovo, a car and a private home were damaged, although no injuries were reported. In Podolsk, fires broke out and several civilian infrastructure sites were damaged, along with a private home in the village of Maloye Tolbino. 

Regions bordering Ukraine also came under heavy overnight attack from Ukraine, including Belgorod, Bryansk and Kursk. These oblasts have frequently been targeted throughout the years-long war. Nationwide, at least four people were killed and dozens more injured in the large-scale drone assault.

Ukraine's President Zelensky has long touted the effectiveness of the drone war on Russian oil depots and energy facilities, but by all appearances this fresh drone attack targeted civilian areas as well as general manufacturing centers. According to more from Russian media:

The same wave of strikes hit two logistics centers operated by the Russian online retailer Wildberries in Kotovsk, Tambov Region, and Elektrostal, near Moscow. The attacks killed eight people and injured dozens more, according to regional officials.

Wildberries, often called the Russian version of Amazon, is one of the country’s most popular online retailers. Kiev confirmed that it had deliberately targeted the warehouses, claiming they stored components used in drone and navigation equipment.

Crimea was also once again heavily targeted, with the Russian Defense Ministry saying it intercepted many drones over the peninsula between Sunday night and Monday.

Reuters: damage recorded in Podolsk & other areas of Moscow region...

Russian officials said air defenses repelled a drone attack on Moscow region, with 400 drones reportedly launched overnight and damage recorded in Podolsk and other areas https://t.co/dfaQPHMfFT pic.twitter.com/xmhFivKZlX

— Reuters (@Reuters) July 20, 2026

It seems this was Zelensky's 'answer' to the massive Russian ballistic missile attacks on Kiev of the last days.

While the Kremlin over the weekend boasted of new ground advances along the front lines, the war has been focused in the air of late. As for the Ukrainian capital, emergency crews have been scrambling on an almost nightly basis.

Concerning a weekend attack, "The Kyiv government said firefighters were responding to blazes in five different districts after the attack, one of the biggest in recent weeks, hit residential buildings, office and industrial sites, a dormitory and vehicles," The Independent described.

Tyler Durden Mon, 07/20/2026 - 11:00