Waste Of The Day: Illinois Corrections Employees Exploit Vacation-Overtime Loophole

Authored by Jeremy Portnoy via RealClearInvestigations,

Topline: Overtime pay is meant for employees working more than eight hours per day, but the Illinois Department of Corrections has found a way to circumvent that rule. Employees are using paid time off to stay home during work hours and then coming in later the same day to work overtime, according to a report from the state auditor released on Sept. 23. 

Key facts: Employees are more than happy to gain extra overtime hours and earn 1.5 times their regular salary, but the practice of “shift swapping” violates the Department of Corrections’ training manual, in the opinion of the state auditor. The department gets billed for overtime twice: first to pay an officer to cover for the employee on paid leave, and then again when the employee on leave returns later in the day. 

Auditors reviewed the 20 highest overtime earners from two of Illinois’ largest prisons. They found 150 times where an employee used an entire days’ worth of paid leave and also worked overtime the same day. 

The audit says that the Department of Corrections spent $151.7 million paying for nearly 3 million hours of overtime in 2024, but it’s unknown how much money individual employees earned in overtime. The audit does not specify, and the Illinois Comptroller did not separate base salary from overtime earnings in response to Open the Books’ open records request for employee compensation. 

Open the Books’ records do show that the highest-paid employee in the Corrections Department last year was Jermiagh Daly, who made $360,790. Another 107 people made more than $200,000. 

Search all federal, state and local salaries and vendor spending with the world’s largest government spending database at OpenTheBooks.com.  

Supporting quote: The Department of Corrections disagreed that shift swapping violates state policy because they are required to find volunteers for overtime hours before forcing any other employee to work overtime.  Otherwise, it would be a “violation of the collective bargaining agreement and would result in a higher cost to the State,” the department claimed in its response to the audit. 

Summary: Private companies can pay their employees however they like, but the government has a responsibility to field a workforce that is the most efficient for the taxpayers it serves. 

The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com 

*  *  * Handy filter tested to remove up to 99.99% of contaminants, including Radon

Tyler Durden Wed, 10/08/2025 - 12:10

Procrastination pays!

I don’t know how these Amazon Prime sales work, but there is apparently 14 hours left to purchase the hardcover edition of “How Not to Invest: The ideas, numbers, and behaviors that destroy wealth―and how to avoid them,” at a 36% savings for $21.19.

I have been pushing the book these months because 1) I am really proud of it; and 2) I know it will make anyone who reads it a better investor.

Tick tock! You have half a day to not only save a few bucks but become a much better steward of your own capital!

 

 

 

The post “How Not to Invest:” Amazon Prime Sale 36% Off appeared first on The Big Picture.

50's Nostalgia Ain't What It Used To Be

By Michael Every of Rabobank

The RBNZ cut the OCR 50bps to 2.50% vs. 25bps expectations but in-line with our forecast. Notably, the RBNZ said they are “open to further reductions as required” and we are now forecasting a further 25bp cut to 2.25% in November. Some of the Bank’s comments also raise an eyebrow: “Domestic inflationary pressures have continued to moderate as projected, giving the Committee more confidence that inflationary pressures are contained. Global inflation has continued to decline through 2025. Inflation is especially low throughout Asia, and negative in China. Headline inflation in the US has increased, but evidence suggests that pass-through of tariffs to consumer prices has so far been weaker than expected. To date, there is little evidence of a material impact of tariffs on the prices of New Zealand’s imports or exports.” They’re right on Asia, if one overlooks food prices; the jury is out on the US, but they are echoing Fed new-boy Miran; and NZ hasn’t imposed any tariffs and a tariff on its exports couldn’t be inflationary for them anyway.

The EU raised steel tariffs to a Trumpian 50% level over a sharply reduced quota threshold as Bloomberg notes “The EU is trying to convince the US to lower its rate for EU steel and jointly target China instead, with the EU industry commissioner saying the EU shares the same industrial agenda as the US.” Yet does the US care as long as Europe already echoes its tariffs vs China?

In broader geoeconomics, US lawmakers are pushing to expanded chip export curbs on China, where a bipartisan Congressional panel just urged widened controls on chip tools and tighter coordination with US allies amid fears that the Trump White House is easing tech limits (SCMP). Will Europe belatedly follow suite on that front too in the areas it contributes to chipmaking?

It’s argued the US, in allowing preferential tariff access for some African countries to expire, is “pushing Africa further into China’s orbit’ (SCMP) - albeit as importers from it not exporters to it, at least not of textiles anyway.

Moreover, the Business Standard notes ‘From oil to pistachios: How barter trade is reshaping global commerce.’ That’s a dollar-priced but dollar-dodging scheme referred to here for years now, and underlined by recent Bloomberg exposes on how China is buying oil and metals from Iran in exchange for construction contracts and cars. Sanctions can’t do anything about it: stronger economic, or non-economic, statecraft tools would be required from the US. Relatedly, China is adding 11 new oil reserve sites in 2025 and 2026 - “because markets” obviously.

That’s as Congress also urged the White House to preserve stability in the Indo-Pacific and to “curb China’s Taiwan game plan”; the New York Times reports that Washington law firm Williams & Connolly was hacked by China as part of a larger campaign aimed at US law firms; Ukraine said it expects to get a slow drip of US Tomahawk missiles that won’t be used for deep strikes yet, but the longer Russia refuses to come to the table, the more they will get and the further into Russia they will be allowed to hit; National review warns ‘Brazil’s Leftist President Is Giving China a Foothold in America’s Backyard’; and Indian PM Modi praises Putin at the start of UK PM Starmer’s state visit, which Bloomberg describes as an “awkward note.”

50-50 is one way to read the news from the Middle East, where the Israeli PM’s office reports progress in cautious optimism over talks with Hamas, but some sources have it that the group is refusing to release hostages first as per the deal’s terms, insisting on Israeli withdrawal beforehand, and has named prisoners it demands released in exchange which Israel can’t accept.

Regardless, the Financial Times’ op-ed from Martin Wolf, based on somebody else’s work, argues ‘Trump’s tariffs won’t deliver many jobs’ as “Nostalgia is not a strategy: the past cannot return.” Ironically, as national security concerns soar, it’s the recent free trade past that likely can’t return for neoliberal/neoclassical thinkers who can ‘prove’ how few jobs balance on the head of any policy pin that pricks their ideological bubble.

Indeed, the op-ed ignores key arguments in a contested intellectual space: there are second and third order effects static models don’t capture; onshoring via automation (as with US firm Sharpie) is an economic benefit; and countries who successfully employed neomercantilism (not all, to be clear) gained jobs. Yet nostalgia for “because markets!” in the FT op-ed page lingers given it promised, but months later still can’t deliver, an alternative way to structure the global economy that doesn’t have what it admits are vast, destabilising imbalances in trade and capital flows, and in equality.

On which note, in the US, there is still no light at the end of the tunnel regarding the government shutdown, but Congress seems united against Trump's shutdown back-pay threat that nobody will get the cash for days work missed so far.

As even a former French prime minister calls on President Macron to quit to end France’s crisis, which would trigger a presidential election that opposition leader Le Pen currently couldn’t contest as she is still in a court battle on that front, a possible way out being floated is France abandoning its planned pension reforms to placate socialists in parliament. Yet would that risk swapping a political crisis for a financial one? ‘What is happening in France may not stay in France, from Mohammad El-Erian, again in the FT, argues “Bond markets are losing patience with political paralysis.”

Yet ECB President Lagarde just re-upped her June argument that the Euro must become a key global reserve currency - right as Europe hits a major political crisis; is in a geopolitical one; is debating using Russia’s frozen FX reserves for Ukraine, scaring off Global South capital; sees whispers of (further) ECB intervention in bond markets; and has adopted a 50% steel tariff. "We are innocent bystanders of policy decisions made in Washington and of portfolio allocation decisions made worldwide, which we don’t have much influence over," Lagarde said in Paris. "It is not a sustainable position. We cannot remain a passive safe haven, absorbing the shocks created elsewhere. We need to be a currency that shapes its own destiny." There would be global agreement on the “bystanders” part, not so much on the rest - or at least not without actions that run counter to all Europe’s liberal world order instincts. What odds will the market give of Lagarde succeeding in making a European currency matter globally again in a contested geopolitical environment: 50-1?

Over the Channel, Tory party Shadow Justice Secretary Jenrick is “accused of fuelling ‘toxic nationalism’ with Birmingham claims”, says the Guardian; yet ‘Grassroots Tories want pact with Reform, poll finds’, claims the Telegraph. Ceteris paribus, that would deliver around 50% of the UK vote, all but guaranteeing a Farage-led government with a large working majority. Then what? That’s still a hypothetical for now, but one markets may start to take more seriously ahead.

In the meantime, Adam Tooze is arguing ‘Britain needs a ‘whatever it takes’ moment’. Yet if the BOE goes MMT with markets in this mood, and with the UK running a vast trade deficit, how does that pan out for Sterling and the long end of the curve? Or, if the whole yield curve is ‘whatever it taken’ by the BOE, just for Sterling? Indeed, how does such a radical policy step work without a matching UK industrial policy and tariffs, which in turn requires an energy policy and an overarching geopolitical strategy re: trade blocs, etc? One sees why Martin Wolf prefers his own patent brand of nostalgia – it’s far easier to digest.

Tyler Durden Wed, 10/08/2025 - 11:30

Could AI's Growing Thirst For Water Usher In Localized Resource Wars 

In the era of artificial intelligence, water availability is poised to become a top concern for developers, just as low-cost, reliable electricity and grid connection delays have become significant issues. These data centers consume massive quantities of water daily to cool next-generation AI servers that, with each new chatbot iteration, demand increasing amounts of power. This rising energy demand has rendered open-air cooling systems obsolete, pushing liquid cooling technologies to the forefront.

We first identified the stunning water consumption problem of data centers at the start of the year, as well as penned a note over the summer about a "chilling opportunity" in data center liquid cooling after UBS forecasted that thermal loads could exceed 200kW to 1,000 kW per rack by the end of the decade. This means air cooling is quickly becoming obsolete as new chatbots demand higher compute power, and therefore more advanced AI chips, driving higher demand for liquid cooling technologies.

The pace of data center development is accelerating, as we previously pointed out in our discussion of the "circular economy" of AI, calling it, quite aptly, a stunning "circle jerk"... 

... that has ushered in an unprecedented era of Big Tech CapEx to build out AI infrastructure. 

Notably, data centers are surpassing office construction spending and are coming under increased scrutiny for their impact on power grids and rising electricity costs.

Now that the backdrop has been explained, and data center buildouts are set to continue for years to come, ZeroHedge readers have already been well-informed about the urgent need for power grid upgrades. The other critical resource needed to keep these data centers running is the availability of fresh water for cooling.

Already, many data center developers tend to choose sites with low energy costs, even in drought-prone regions, intensifying stress on local water tables. 

Stanford hydrologist Newsha Ajami told The New York Times that "water is an afterthought" for Big Tech firms building out data centers, which rely on local governments to solve shortages later.

As we mentioned earlier, every new iteration of a chatbot involves the need for more and more compute, that forces data centers to source the latest and greatest AI chips, in turn, means server racks demand higher and higher power consumption, with air cool technoligies no longer able to do the job, liquid cooling is in high demand and will be well into the 2030s. 

This growing demand for water has already strained local water tables across various communities nationwide, like in Texas, Arizona, and Colorado. The NYT noted that data center expansion has been linked to localized droughts and new battles over water rights. 

NYT interviewed Beverly Morris in Newton County, Ga, whose well ran dry after Meta broke ground on a $750 million data center. Morris' home is located about 1,000 feet from the new data center. 

This leaves us with a Morgan Stanley report that forecasts AI data centers will consume around 1,068 billion liters of water annually by 2028, an 11 times increase from 2024 levels. 

Stunning. 

"Water is as critical to AI as power - and while solutions to manage water consumption are already emerging, this remains an underappreciated theme," a team of MS analysts led by Ehsernta Fu wrote to clients early last month. 

Where are the data centers?

The key takeaways of the report reveal that water consumption and its impact on local water tables will become a major point of debate. If people are already up in arms over soaring utility bills, just give it a few more years and water shortages will almost certainly be the next issue everyone is talking about:

AI's Expanding Water Consumption Footprint. We expect AI data centers to drive annual water consumption for cooling and electricity generation to approximately 1,068 billion liters by 2028 (our base case) – an 11x increase from 2024 estimates (which equates to a more than eightfold increase in power demand). While the water consumption by data center cooling is well-recognized, its indirect consumption via electricity generation is significant but underappreciated. Beyond direct operations, AI's' scope 3' water footprint includes semiconductor manufacturing, where facilities can consume up to five million gallons of ultrapure water daily, underscoring the industry's reliance on water-intensive processes.

Water consumption is an evolving topic, whereas our estimates depend on assumptions around water consumption factors, water intensity, penetration of cooling technologies, and regional energy mix, etc., all of which may shift as operations adopt more efficient solutions in future. To account for this uncertainty, we present three scenarios factoring in different levels of assumptions. Under these scenarios, AI's water consumption could range between 637bn liters to 1,485bn liters per annum by 2028e.

Water Stress is a Localized Risk. While AI's total water use may appear modest on a global scale, its impact is highly localized. Over half of the world's leading data center hubs are situated in regions already facing 'medium basin physical risk'. These vulnerabilities are mirrored in secondary markets and growth pipelines. The recent example of Tucson, Arizona's rejection of Amazon-backed Project Blue shows that governments at all levels are intervening to safeguard water resources.

Regulatory Landscape: From Restrictions to Incentives. The regulatory landscape is evolving from reactive restrictions to proactive incentives and standards. Jurisdictions such as California, Singapore, and the EU are introducing tax credits, disclosure mandates, and performance benchmarks to promote water-efficient technologies

Investment Framework for AI Water Consumption. For investors, this underappreciated theme presents three strategic avenues:

1. Investing in Enablers: This includes liquid cooling solutions for AI hardware, as well as water recycling and treatment technologies. We identify 17 stocks (of which 9 are OW-rated), including AVC, Vertiv, Johnson Controls and Toray Industries.

2. Renewable Energy Players: These offer indirect exposure to the reduction of off- site water consumption via electricity generation. We screened 54 stocks with ≥50% revenue/capex exposure (of which 21 are OW-rated).

3. Companies with Strong Water Stewardship: We identify key indicators by hyperscalers or semiconductor foundries to assist investors in gauging companies' water stewardship.

Already, data center electricity consumption on outdated and fragile grids has sent power bills soaring, especially across the Mid-Atlantic area. What residents in these areas must also understand is that these resource-hungry AI server racks powering chatbots are now coming for the fresh water beneath their land. 

Developers are already reporting that water availability is slowing down buildouts. At the top of the list is local power constraints. 

This might usher in an era of localized resource wars. 

ZeroHedge Pro Subs can access the full Morgan Stanley note - complete with over 40 detailed exhibits and charts - in the usual place.

*  *  *

Tyler Durden Wed, 10/08/2025 - 11:10

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 4.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 3, 2025.

The Market Composite Index, a measure of mortgage loan application volume, decreased 4.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5 percent compared with the previous week. The Refinance Index decreased 8 percent from the previous week and was 18 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 14 percent higher than the same week one year ago.

“With mortgage rates on fixed-rate loans little changed last week, refinance application activity generally declined, with the exception of a modest increase for FHA refinance applications,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Refinance volume remains somewhat elevated relative to levels of a month ago. Purchase activity declined by about 1 percent for the week but continues to show moderate growth on an annual basis, and stronger growth for FHA loans, favored by first-time homebuyers.

Added Fratantoni, “The ARM share increased to 9.5 percent last week from 8.4 percent the prior week. Our survey shows 5/1 ARM rates are averaging almost a percentage point below 30-year fixed rates, and this differential is leading more purchase and refinance applicants to consider ARMs."

on the road, no graphs this week!

Momentum From Trump-Putin Talks In Alaska Has Run Out: Kremlin

The Kremlin has expressed its view Wednesday that the positive momentum created in the wake of the August 15 meeting in Alaska between Presidents Trump and Putin has waned and come to an end.

Deputy Foreign Minister Sergey Ryabkov has stated bluntly that this momentum has now run out. His fresh words indicated Moscow's point of view that positive advancement toward peace and good-will was "largely exhausted".

According to Ryabkov, the "strong drive" to reach a resolution to the Ukraine conflict was undermined by Russia's adversaries especially in Europe, which are currently "pushing for a war to the last Ukrainian."

The talks in Anchorage did not produce a major breakthrough; however, both leaders at the time described them as productive with the White House saying the meeting offered "a glimmer of hope for lasting peace."

Ryabkov Wednesday continued by saying "This is the result of the destructive actions primarily by Europeans, which we speak about openly and directly."

Newsweek draws the following observation, calling this a significant blow for Trump:

The remarks are a blow for Trump, who has tried mostly through diplomatic means to bring an end to Russia's ongoing invasion. He has directly engaged with Putin, despite concerns from Kyiv and NATO allies about perceptions that Moscow was being rewarded for its aggression after its years-long isolation by the West. Most of Europe wants to take a hard line on Russia.

But the Kremlin has also put some blame on Washington as well, particularly in the wake of the White House indicating it's actually mulling the approval of long-range Tomahawk missiles for Ukraine.

Trump has said he has "sort of made a decision" while decrying escalation - seen by many as an indicator that he's leaning against sending the missiles.

Russian Foreign Ministry: The possibility of ending the war in Ukraine, which emerged after the meeting between Trump and Putin, has been exhausted. pic.twitter.com/QznJ18P1Fq

— Polymarket Intel (@PolymarketIntel) October 8, 2025

Ryabkov said of this matter in his comments that such a move "would mark a significant, one might even say qualitative, change in the situation," but still asserted that this wouldn't impact Russia's "determination to achieve our stated goals."

"I hope that those who are pushing Washington toward such decisions fully understand the gravity and depth of the potential consequences," the deputy foreign minister told state media. "We, of course, call on the US leadership and the American military to approach this situation soberly, sensibly and responsibly."

Tyler Durden Wed, 10/08/2025 - 10:50

WTI Holds Gains After US Crude Production Hits Record High

Oil prices are higher this morning as investors brushed off oversupply fears, having digested a decision earlier by OPEC+ to restrain production increases next month.

“The disconnect continues between paper pricing and the predicted glut in global balances,” said Keshav Lohiya, founder of consultant Oilytics.

“We are back to an oil trading world where flat price is firmly in the $65 to $70 world.”

Additionally, prices shrugged off the crude build reported by API overnight.

API

• Crude +2.8mm

• Cushing -1.2mm

• Gasoline -1.2mm

• Distillates -1.8mm

DOE

• Crude +3.715mm

• Cushing -763k

• Gasoline -1.6mm

• Distillates -2.018mm - biggest draw since June

The official data confirmed API's sizable crude build (second week in a row) but products and stocks at Cushing saw inventory drawdowns...

Source: Bloomberg

With the addition of 285k barrels to the SPR, total crude stocks rose by the most in a month

Source: Bloomberg

US crude production rose once again, back to record highs, despite the trend lower in rig counts...

Source: Bloomberg

WTI prices held gains after the official data

Goldman Sachs reaffirmed its bearish outlook on oil, saying the global market faces an average daily surplus of about 2 million barrels from this quarter through next year. That will drag prices lower, with Brent expected to average $56 a barrel in 2026, analysts including Yulia Grigsby said in a note.

"The market is in price limbo, with one side bent towards a possible supply glut and the other believing the ramp-up will not be as fast as anticipated," said Emril Jamil, a senior analyst at LSEG Oil Research.

Price gains are however capped as fears of Russian supply disruption eased, with crude oil shipments holding close to a 16-month high over the past four weeks, the ANZ analysts said.

Tyler Durden Wed, 10/08/2025 - 10:42

Homeland Security: Arrests At Southern Border Hit 55-Year Low

Authored by T.J.Muscaro via The Epoch Times,

The 2025 fiscal year had the lowest number of arrests of illegal immigrants made on the U.S. southern border in 55 years, according to the Department of Homeland Security and Customs and Border Protection (CBP).

“We have had the most secure border in American history, and our end-of-year numbers prove it,” Homeland Security Secretary Kristi Noem said in an Oct. 7 statement.

“We have shattered multiple records this year, and once again we have broken a new record.”

The United States’ 2025 fiscal year ran from Oct. 1, 2024, through Sept. 30, 2025. During that time, authorities made 237,565 arrests along the southern border with Mexico. That total represented an 84 percent drop from the previous year—which had more than 1.5 million illegal immigrants apprehensions—and the lowest number recorded since 1970, which had 201,780 arrests.

“The latest number includes nearly four months of the Biden administration,” the Department of Homeland Security (DHS) said in the statement.

”Arrests fell sharply after the Biden administration imposed severe asylum restrictions in June 2024.

“They plummeted more after the Trump administration virtually eliminated asylum access and dispatched thousands of military troops to the border.”

According to the department, 72 percent of the total arrests occurred during the first 111 days of the fiscal year, which took place in the final months of the Biden administration, totaling 172,026 of the 237,565 arrests.

The year ended with authorities averaging 279 arrests a day in the month of September. While that number was up from the 204 arrests per day recorded in August, it was still down considerably from the nearly 1,800 border arrests per day recorded in September 2024.

That number is also 95 percent lower than the daily average maintained by the Biden administration, which was 5,110 from February 2021 through December 2024.

The previous four fiscal years averaged 1.86 million arrests.

During the Biden administration, thousands of those arrested ended up being released into the United States, including 9,144 releases in September 2024.

DHS touted in its statement that September 2025 was the fifth consecutive month with zero releases by Border Patrol.

These low arrest numbers are being accompanied by increased deportation figures. Just before the fiscal year came to a close, DHS announced that more than 2 million illegal immigrants had been deported, or had self-deported, since President Donald Trump began his second term. As of Sept. 23, an estimated 1.6 million voluntarily self-deported using the CBP Home App, and more than 400,000 were removed.

Tyler Durden Wed, 10/08/2025 - 09:40

The post Weakening Patent Monopolies: The Most Effective Wealth Tax appeared first on CEPR.

Signal, AfD Slam EU Chat Control As End Of Privacy In Europe

Via Remix News,

After Germany dropped its long-standing opposition to EU chat control, leading encrypted messenger Signal issued a dire warning about privacy in Europe, with the post going viral.

However, now European parties such as the Alternative for Germany (AfD) have joined in the criticism, with the party warning just before the EU Council vote that so-called “chat control” could end privacy entirely in Europe.

The protest from the AfD comes after Signal threatened to pull out entirely from Europe if the EU implements its surveillance plans. If Signal went through with such a move, it would be a major black eye for the EU, putting it on par with surveillance states like China.

Ruben Rupp, the digital policy spokesperson for the AfD parliamentary group, warned against “total surveillance under the guise of child protection.”

“What is being sold here is, in reality, a frontal attack on the fundamental rights of all citizens. Such a measure places the entire population under general suspicion,” Rupp said. He added that millions of innocent users would be spied on, and instead, the focus should be on harsher punishments for those who hurt or abuse children, not mass surveillance.

AfD politician Rupp wants Berlin to turn against the new spying powers that would be granted to the EU.

He said that “Germany can no longer duck away, but must vote against this surveillance madness together with freedom-oriented states like Poland and Austria. Freedom and privacy are not negotiable goods.”

The upcoming vote, scheduled for Oct. 14, would see the EU Council vote on the “Regulation on the Prevention and Combating of Child Sexual Abuse,” also known as the CSAM regulation for short.

One of the major countries long opposed to such a measure has been Germany. What the law would actually do would allow automated searches of all private messages across the entire EU, including messages, photos, and videos, in order for the EU to look for child abuse or child pornography materials. Most importantly, these messages would be accessible to the EU even if they were encrypted.

On the surface, the EU says this is necessary to view all data flow in the European Union, including all end-to-end encrypted communications. However, data protection advocates indicate that the move would lead to digital mass surveillance on par with China.

“Under the guise of protecting children, the latest Chat Control proposals would require mass scanning of every message, photo, and video on a person’s device, assessing these via a government-mandated database or AI model to determine whether they are permissible content or not,” writes Signal in a call to action.

Signal wrote a press release opposing the EU chat control plan, which gained 4 million views on X alone.

“We are alarmed by reports that Germany is on the verge of a catastrophic about-face, reversing its longstanding and principled opposition to the EU’s Chat Control proposal which, if passed, could spell the end of the right to privacy in Europe,” wrote the messaging app non-profit, which is used by hundreds of millions of people.

We are alarmed by reports that Germany is on the verge of a catastrophic about-face, reversing its longstanding and principled opposition to the EU’s Chat Control proposal which, if passed, could spell the end of the right to privacy in Europe. https://t.co/015qmQnIS2

— Signal (@signalapp) October 3, 2025

Signal further warned in its press release that the EU’s proposal “is a horrifying idea for many reasons. First, the technical consensus is clear. Scanning every message–whether you do it before, or after these messages are encrypted–negates the very premise of end-to-end encryption. Instead of having to break the gold-standard Signal encryption protocol to access someone’s Signal messages, hackers and hostile nation states only need to piggyback on the access granted to the scanning system. This threat is so severe that even intelligence agencies agree it would be catastrophic for national security.”

There are further fears that the program could be rolled out to protect children, but over time, it could be expanded to censor political speech and arrest or punish political opponents of the ruling liberal establishment in Europe. Notably, users have been prosecuted for sharing memes, political content, and “off-color” jokes, oftentimes in private groups, such as the case of Dries Van Langenhove in Belgium.

Read more here...

Tyler Durden Wed, 10/08/2025 - 09:15

Futures Rise As Global Debasement Trade Sends Gold Over $4000

Futures are higher again, reversing Tuesday's modest Oracle-led decline, and are led by small caps despite additional multi billion tech investment headlines. As of 8:00am ET, S&P 500 futures were 0.1% higher, set for their 8th gain in the past 9 days, with Nasdaq 100 contacts +0.2% with Mag7, Semis, and AI-themed plays all rallying off the investment news. In premarket trading, AMD extended gains after an explosive rally following its multibillion-dollar AI deal with OpenAI. Tesla advanced after it unveiled a cheaper version of its top-selling electric vehicle. Cyclicals poised to outperform Defensive even as Ray Dalio warned that the AI-driven market rally “feels frothy.” Of course, it is all now just a debasement trade with everyone and their mother dumping fiat and buying hard currencies, sending gold above $4,000 an ounce for the first time, and silver above $49. The dollar gained for a third day against major peers and is now 2.5% off its 52-wk low as 96.00, while Treasury yields dipped. In commodities, Energy and Precious metals are the stand outs as gold breaks above $4k. The Administration said ~$13bn in farming aid may be rolled out soon. Today we get the FOMC minutes at 2pm; the Federal Budget Balance will likely be delayed due to the government shutdown. 

In premarket trading, Mag 7 stocks are mixed (Tesla +0.3%, Nvidia +0.6%, Amazon +0.4%, Microsoft +0.1%, Meta Platforms -0.1%, Alphabet -0.1%, Apple -0.1%).

• Precious metals miners climb after spot gold rallied past $4,000 an ounce for the first time amid concerns over the US economy and a government shutdown.
• AST SpaceMobile (ASTS) rises 9% after announcing a pact with Verizon to provide direct-to-cellular AST SpaceMobile service when needed for Verizon customers starting in 2026.
• CervoMed (CRVO) soars 16% after announcing that its Phase 2b trial demonstrated neflamapimod’s potential as a treatment for dementia with Lewy bodies.
• Confluent (CFLT) gains 17% as Reuters reports that the data-infrastructure company is exploring a sale after receiving acquisition interest.
• Fair Isaac Corp. (FICO) falls 3% after Equifax said its VantageScore 4.0 service will offer mortgage credit scores at $4.50 through the end of 2027.
• Jefferies Financial Group (JEF) slips nearly 2% after it said it’s in communication with First Brands Group’s advisers to determine the impact of First Brands’ bankruptcy on Leucadia Asset Management’s Point Bonita Capital. Leucadia Asset Management is owned by Jefferies.
• Joby Aviation (JOBY) is down 10% after offering $500 million in shares via Morgan Stanley.
• Lantheus Holdings (LNTH) slips 2% following a downgrade to neutral at Goldman Sachs, which sees less certainty regarding the medical-equipment company’s outlook.
• Penguin Solutions (PENG) shares drop 23% after the company’s FY26 sales guidance range fell short of the consensus of analyst estimates. The company, which helps enterprises to build out AI infrastructure, said the guidance range is wider than usual to “reflect a broader set of potential outcomes.”
• QuantumScape (QS) rises 5% after the maker of lithium-metal batteries entered a joint-development agreement with Murata Manufacturing Co.
• Rocket Lab (RKLB) rises 6% after the company said it signed a contract with iQPS to launch three more satellites for the Japanese compan

In corporate news, Salesforce told customers it won’t pay a ransom demand from a hacker who claimed to have stolen a large amount of client data and threatened to publish it. xAI is raising more financing than initially planned, tapping backers including Nvidia to lift its ongoing funding round to $20 billion, according to people with knowledge of the matter.

Concerns have been growing that $16 trillion surge in the S&P 500 from its April lows had gone too far. Tuesday’s drop came amid mounting chatter about lofty valuations around artificial intelligence, with some market participants seeing an echo of the excesses that led to the dot-com crash 25 years ago. On Tuesday, investors turned cautious after the Information reported that Oracle may post a disappointing profit margin for the latest quarter, spurring a selloff in tech shares.  Still, many investors fear missing out on further gains, with the upcoming earnings season set to provide clues on the rally’s sustainability.

“There are worrying signals on the AI rally, which reminds me of 1997 when I started my career,” said Gilles Guibout, head of European equities at Axa Investment Managers. “The bubble burst in 2000 but those managers who had refused to follow the rally, rightfully expecting it to go pop, lost a lot of money for their clients. There’s a real risk to get out of the AI trade too early; what you need to do is stay invested but with your finger on the exit button and stay diversified.”

And with nobody willing to sell first, equity volatility remains deeply subdued, despite a growing list of potential cracks beneath the surface. According to Bank of America, S&P 500 three-month realized vol sits near 8.5%, its lowest decile since 1990. 

Catching up to our discussion on the massive AI circle jerk, Bloomberg’s Big Take today highlights how a wave of deals involving Nvidia and OpenAI are escalating concerns that an increasingly complex and interconnected web of business transactions is artificially propping up the AI boom. Still, Goldman strategist Peter Oppenheimer said it’s too early to be worried about a bubble. The rally in tech has been accompanied by robust earnings growth, while previous bubbles were driven mainly by speculation. And Jamie Dimon said that JPMorgan’s investments in AI are paying off, with cost savings matching the $2 billion annual spend on developing the technology.

As noted last night, the global currency debasement trade pushed Gold above $4,000 an ounce for the first time ever, with silver rising above $49 for the first time since 2011 and on pace for a new record high.

Europe’s Stoxx 600 benchmark climbed 0.6%, on track for another record close, as the basic resources sector jumped more than 1%. The French CAC 40 outperformed most of its regional peers after the outgoing PM expressed optimism that an accord can be reached to allow the formation of a new government. Lloyds Banking Group Plc led banks higher after a favorable ruling on the cost of disputed car loans. European stocks were also buoyed by moves to resolve France’s budget impasse. The country’s CAC 40 equity index rose as much as 0.8% and bond yields fell. The European technology sub-index, however, underperformed. BMW AG slumped, dragging peers lower, after the German luxury-car maker cut its financial guidance on weak sales in China and tariff-related costs. Here are some of the biggest European movers today:

• Umicore shares rise as much as 8%, to their highest since June 2024, after the company announced it will sell permanently tied-up gold inventories, strengthening its balance sheet
• Marston shares advance as much as 11%, the most in a year, following a trading update from the UK pub company which prompts Peel Hunt to increase its pretax profit estimates
• Addnode gains as much as 13% following an upgrade to buy from hold at Pareto Securities, with the Swedish IT group now deemed to be trading back at attractive levels
• BMW shares decline as much as 7.4% after cutting its guidance for the full year due to weak volume growth in China and costs related to the implementation of tariffs
• Aryzta shares fall as much as 7.9%, the most in three years, after the Swiss baker issued a profit warning and said it replaced CEO Michael Schai with immediate effect
• Aurubis shares drop as much as 5.7%, retreating from Tuesday’s record high close, after the copper smelting company released an update ahead of its capital markets day
• Aixtron shares fall as much as 8.9%, the most since April, as analysts at JPMorgan forecast that a slower recovery in the firm’s core markets will add near-term risk to estimates
• Serica Energy shares fall as much as 14% after the company said an issue with the flare system on Dana Petroleum-operated Triton FPSO resulted in a temporary suspension of production from Sept. 30
• Unite Group shares fall as much as 6.1%, to the lowest in more than five years, after Morgan Stanley called the latest trading update of the student accommodation provider disappointing

Meanwhile, the US / EU trade deal is being questioned by the EU as the US makes new demands, calling into question the Trump / Van Der Leyen agreement. 

Earlier in the session, Asian stocks declined, driven by losses in technology shares on fresh concerns over the justification for the artificial intelligence boom. The MSCI Asia Pacific Index fell as much 0.8%, the most since Sept. 26, with TSMC, Alibaba and SoftBank among the biggest drags. Hong Kong led losses as the market reopened after a holiday, while Taiwan, Singapore and Malaysia also saw declines. Vietnam’s benchmark briefly surged as much as 3% before paring much of the gain, after FTSE Russell upgraded it to emerging market status from frontier. Elsewhere, New Zealand’s key stock index extended gains after the central bank cut interest rates more aggressively than expected and said it’s open to further reductions. Traders also await a decision in Thailand, where the central bank is expected to deliver its fourth interest rate cut of the year.

In FX, the euro falls 0.3% amid a broad dollar rally. The kiwi is one of the weakest of the G-10 currencies, falling 0.6% after the RBNZ cut interest rates by 50 bps.

In rates, Treasuries bull-flattened in the early US session with long-end yields richer by around 2.5bp on the day, following similar price action in European bonds. With US front-end yields little changed, 2s10s and 5s30s spreads are flatter by 2bp-3bp; 10-year near 4.1% is 2bp lower on the day, with UK’s keeping pace and Germany’s outperforming after auctions in both markets. French bonds advanced during London morning after caretaker prime minister struck a note of optimism on the budget before starting a final day of talks to form a government, narrowing the 10-year French yield spread with Germany by 3 bps to around 83 bps. US session includes 10-year note auction and minutes of September FOMC meeting. 

In commodities, gold is up over $50, having crossed $4,000/oz for the first time earlier today. WTI crude futures rise 1% to $62.30 a barrel. 

The US economic calendar calendar, still subject to delays from the ongoing government shutdown, includes FOMC meetings minutes release at 2pm. Fed speaker slate includes Musalem (9:20am), Barr (9:30am, 5:45pm), Goolsbee (10am, 7:15pm) and Kashkari (3:15pm, 4:30pm)

Market Snapshot

• S&P 500 mini +0.1%
• Nasdaq 100 mini +0.2%
• Russell 2000 mini +0.4%
• Stoxx Europe 600 +0.6%
• DAX +0.4%, CAC 40 +0.7%
• 10-year Treasury yield -1 basis point at 4.11%
• VIX -0.3 points at 16.97
• Bloomberg Dollar Index +0.2% at 1211.81
• euro -0.4% at $1.1613
• WTI crude +1.4% at $62.6/barrel

Top Overnight News

• Trump’s farm aid plan (which is expected to be $12-13B initially and potentially as large as $50B over time) is delayed by the shutdown. officials were said to have readied nearly USD 13bln from an internal USDA fund, although there is no final decision on how much will be used for farm aid, or when: Politico
• American farmers are in “panic” mode as Chinese soybean buyers stay on the sidelines (“we’ll see the bottom drop out if we don’t get a deal with China soon”). WSJ
• US Senate leaders were reportedly trying to lock in votes on Tuesday evening with a variety of options, including the noms bloc, privileged resolutions (maybe Canada tariff disapproval), and the duelling CRs again: Punchbowl.
• More than 250,000 federal workers missed paychecks as the shutdown entered the second week, with 2 million more at risk. Meanwhile, bond traders are hedging against a wider range of Fed outcomes amid a data blackout. BBG
• Elon Musk’s xAI is raising $20 billion, including $2 billion from Nvidia, to finance AI chips for its Colossus 2 project, people familiar said. The deal will be split between equity and debt, allowing xAI to rent Nvidia processors for five years. BBG
• China saw a spike in travel over the Golden Week holiday, but consumer spending was fairly muted. FT
• Japan's likely next premier Sanae Takaichi is already facing criticism from her ruling party's long-time coalition partner, a rift that could delay or, in an extreme scenario, jeopardize her premiership. RTRS
• EU officials see new US trade demands as potentially threatening a recent deal and risking renewed conflict, people familiar said. Washington wants talks on the EU’s legislation, raising concerns over regulatory autonomy. BBG
• Caretaker French Prime Minister Sebastien Lecornu struck a cautiously optimistic tone on Wednesday, saying a deal could potentially be reached on the country's budget by year-end, making the risk of a snap election more remote. RTRS
• Prolonged funding pressures in US money markets, just as bank reserves held at the Federal Reserve are dwindling, suggest the central bank may be getting closer to ending the unwinding of its massive portfolio of securities. BBG

Trade/Tariffs

• EU sees new US trade demands hollowing out deal struck by US President Trump, according to Bloomberg citing sources. Earlier in the month, Trump admin reportedly sent the EU a fresh proposal for implementing “reciprocal, fair and balanced” trade.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed with demand hampered following the negative handover from the US, where stocks snapped a 7-day win streak as small caps underperformed and with sentiment weighed on by AI-profitability concerns. ASX 200 was rangebound as gains in healthcare and the top-weighted financial industry were offset by underperformance in Tech and Consumer sectors. Nikkei 225 lacked conviction and oscillated around the 48,000 level amid a weaker currency and soft wages data. Hang Seng retreated on return from the holiday closure with tech stocks heavily represented in the list of worst performers, while mainland participants were still away but are set to return from the National Day Golden Week celebrations tomorrow.

Top Asian News

• RBNZ cut the OCR by 50bps to 2.50% vs mixed views between a 25bps and 50bps cut, while the committee remains open to further reductions in the OCR as required for inflation to settle sustainably near the 2% target mid-point in the medium term. RBNZ said higher near-term inflation could prove to be more persistent and that with spare capacity in the economy, inflation is expected to return to around the 2% target mid-point over the first half of 2026, but noted upside and downside risks to the inflation outlook. RBNZ Minutes revealed that the committee discussed the options of reducing the OCR by 25bps or by 50bps at the meeting, while it stated that the case for reducing the OCR by 50 basis points emphasised prolonged spare capacity and the associated downside risk to medium-term activity and inflation.
• Oxford Economics has brought forward their timing of the next BoJ 25bps rate hike to December from next year and have added another 25bps hike in mid-2026.
• Japanese Economy Minister Akazawa is expected to depart from his position, according to local reports via Mainichi newspaper.

Top European News

• French PM Lecornu to speak again at 19:00 BST
• French PM Lecornu said will present his findings to President Macron later this evening; said France must get a budget by year-end; talks so far showing a willingness to get this budget through by year-end. Sees possibility of dissolution of parliament as becoming more remote.
• French Socialist Leader Faure says the party cannot back the current budget plan, no guarantee that pension reforms will be suspended.
• UK ONS said there's an error in public finances data between Jan-Aug, citing HMRC error; VAT data error means public sector net borrowing in current and prior FY is a combined GBP 3bln lower. UK borrowing in the past five months of FY was GBP 2bln lower than previously thought.
• ECB's Rehn has warned there is a risk that inflation slows below the ECB's 2% inflation target, according to Bloomberg, citing the Karon Grilli podcast. There are downside inflation risks in sight over the next couple of years; cites EUR strength, stabilisation of wages and services inflation.
• ECB's Nagel said current monetary policy is appropriate; euro zone inflation close to 2% target, via Greek newspaper.
• ECB's Escriva said he cannot pre-empt direction of future policy move; inflation expectations are very much anchored ECB needs to be cautious. Outlook remains uncertain going forward. Wouldn't overemphasise a strong euro as a risk factor, European economy showing great deal of resilience. Trade disruptions from US are potentially inflationary. Inflation risks are very much balanced. Spanish housing supply lagging very much.
• BoE FPC Minutes: FPC decided to maintain the UK countercyclical capital buffer (CCyB) rate at 2% Risks associated with geopolitical tensions, global fragmentation of trade and financial markets, and pressures on sovereign debt markets remain elevated. Despite persistent material uncertainty around the global macroeconomic outlook, risky asset valuations have increased and credit spreads have compressed. There have been some notable credit defaults in the US automotive sector since the last meeting. A sudden or significant change in perceptions of Federal Reserve credibility could result in a sharp re-pricing of US dollar assets, including in US sovereign debt markets, with the potential for increased volatility, risk premia, and global spillovers.

FX

• DXY is up for a third session in a row with WTD gains thus far of 1.1%. It remains the case that the price action is not being driven by outright bullish calls on the USD but more a case of weakness elsewhere, mainly JPY and EUR, with NZD the latest of its major counterparts to take a stumble. If anything, the macro narrative surrounding the US remains a downbeat one as the government shutdown continues to drag on, delaying economic data releases and threatening a hit to domestic growth. DXY has ventured as high as 98.97 with focus on a test of the 99.0 mark; not breached since 5th August.
• EUR remains pressured vs. the USD and is just about holding onto a 1.16 handle after delving as low as 1.1607. French political turmoil remains a key part of the Eurozone macro narrative with PM Lecornu (also due to speak @ 19:00BST) set to meet with socialists, greens and communists in an attempt to form a coalition government. The likely price for Macron will be a left-wing PM, which could make the parliamentary arithmetic easier for passing a budget, given that the Socialist Party holds the most seats in the National Assembly. Aside from France, Germany saw further woeful data earlier in the session with German Industrial Orders falling well short of consensus and subsequently stoking concerns over a contraction in the domestic economy. In terms of price action, if 1.16 gives way in EUR/USD the next target comes via the 27th August low at 1.1573.
• JPY remains very much on the backfoot against the USD with USD/JPY having risen five handles since Takaichi's victory in the LDP leadership race. The move has been relentless this week given the market's view that the fallout of Takaichi will leader to a mix of looser monetary and fiscal policy. Subsequently, markets only assign a circa 25% chance of a cut this month vs. roughly 70% last week. Further reason for caution in expecting additional tightening from the BoJ was presented overnight via the August real cash earnings data, which printed a deeper-than-expected contraction. USD/JPY has climbed as high as 152.96 with focus now on a test of 153; not breached since February. If the pair begins to approach 155, given the velocity of the move, expectations of potential intervention will likely increase.
• GBP is a touch weaker vs. the USD but stronger vs. the EUR. At the risk of sounding like a broken record, in the absence of any tier 1 UK data, the macro narrative has failed to evolve beyond ongoing angst ahead of the November 26th Budget. BoE Chief Economist Pill is due to give remarks at 16:00BST. GBP/USD briefly tripped below Tuesday's low at 1.3391 before returning to a 1.34 handle.
• NZD is the laggard across the majors after the RBNZ's decision to opt for a deeper 50bps rate cut (views heading into the meeting were split between 25bps and 50bps). Additionally, the committee noted that it remains open to additional reductions. The minutes stated that the case for reducing the OCR by 50 basis points emphasised prolonged spare capacity and the associated downside risk to medium-term activity and inflation. Subsequently, has extended its descent on a 0.57 handle and hit its lowest level since April 11th.

Fixed Income

• USTs are trading firmer by a few ticks, following the positivity seen across global peers. Currently trading at the upper end of a 112-19+ to 112-25+ range. Nothing really driving sentiment today from a US perspective, but upside, which comes after the safe-haven related upside seen in the prior session. Now traders await a 10yr outing; as a reminder, the last sale was strong, receiving strong demand and a 1.3bps stop-through. FOMC Minutes (Sept) and a slew of Fed speakers will also be in focus, in a day which is void of key US data.
• Bunds are firmer today, in-fitting with the upside seen across peers. Upside today began into German data, before taking another leg higher on the release itself – an upward bias which has held throughout the morning thus far. To recap that German data in brief, Industrial Output printed well below expectations at -4.5% (exp. -1%), though the accompanying release highlighted some caveats; "The marked decrease may be explained, at least in part, by the combination of annual plant closures for holidays and production changeovers”. The upswing seen earlier in the year looks increasingly associated with US-tariff related front loading – following the data, ING suggests that there is now an increasing likelihood of another quarter of contraction for the German economy. Thereafter, the German auction was poor, but ultimately had little follow-through to price action.
• OATs are the relative outperformer today, as outgoing PM Lecornu aims to hold last-minute talks with opposition parties. To recap the situation in France, President Macron asked the PM to hold talks with the opposition parties, giving him a deadline until Wednesday evening. In a presser today, Lecornu said he will present his findings to Macron later this evening; overall, his comments leaned more positively, suggesting that the talks so far show a willingness to get this budget through by year-end. Moreover, Lecornu has suggested suspending President Macron’s pension reforms, which would be welcomed by those on the left. The outgoing PM will be speaking again at 19:00 BST. On the presser itself, some very marginal upticks were in OATs; the OAT-Bund 10yr spread has tightened from recent highs, currently trading around 83.6bps vs previous close at 86.15bps.
• Gilts are in the green alongside peers. Currently trading in a 90.69 to 90.83 range. UK press remains heavily focused on the looming Autumn Budget; most recently, the FT reported that Pimco and BlackRock have called Chancellor Reeves to build a larger buffer in the UK public finances in the November Budget to avoid years of uncertainty over tax and spending decisions. However, a factor boosting sentiment is the ONS revising down UK Government borrowing by GBP 2bln after a recent data error - which may alleviate some of the borrowing-related pressure the Chancellor faces. Today a strong 2029 auction, which saw a b/c of 2.92x had little impact on prices.

Commodities

• Crude benchmarks are trading slightly higher, extending on the prior day's high, despite worries of oversupply in the market with OPEC+ hiked production at its last meeting (albeit by a smaller than expected magnitude) and amid forecasts in the US that point to a record domestic oil output. WTI and Brent continued the late bid from yesterday’s session to form a peak at USD 62.45/bbl and USD 66.15/bbl, respectively, at the time of writing, before a dip towards USD 62.12/bbl and USD 65.88/bbl, respectively, as commentary from the Egypt talks remains positive. Note: EIA is continuing normal publication schedules and data collection.
• Spot gold has broken the USD 4k/oz mark, extending to a peak of USD 4039/oz and thus far remaining near ATHs. The surge in precious metals also comes as investors look to safe havens away from the dollar to protect against rising government debt burdens, geopolitical tensions and expectations of the dollar to continue lower.
• Base metals remain rangebound as China re-enters the market tomorrow. 3M LME Copper dipped to a trough of USD 10.68k/t before reversing to a peak of USD 10.78k/t as copper consolidates after a record weekly gain. Amid copper consolidation, there continues to be a growing consensus that copper still has further to go, with forecasts being revised higher towards USD 11.5-12k/t by the first half of next year due to supply disruptions and a continuing weaker dollar.
• US Private Energy Inventories Data (bbls) Crude +2.8mln (exp. +1.9mln), Distillate -1.8mln (exp. -1.2mln), Gasoline -1.2mln (exp. -0.9mln), Cushing -1.2mln.

Geopolitics: Middle East

• "There are outstanding issues among the negotiators in Egypt", according to Al Arabiya sources.
• Hamas said group positivity is needed to reach a deal, said list of hostages' names exchanged on Wednesday according to agreed numbers, according to a statement.
• "An Israeli security source told Sky News Arabia: Israel insists on not accepting any ideas outside the Trump plan", according to Sky News Arabia
• The atmosphere in the Sharm el-Sheikh negotiations appears to be "very positive", according to a correspondent at Sky News Arabia.
• Hamas leader tells AFP: "Optimism" dominates Gaza talks, via Sky News Arabia.
• Iran's Foreign Minister Araghchi denies reports that he's been in direct contact with US Envoy Witkoff including secret meetings in Doha or Muscat.

Geopolitics: Ukraine

• Russian Foreign Minister says maintaining Russia's obligations under the plutonium agreement with the US is no longer acceptable, via Tass.

US Event Calendar

• 7:00 am: Oct 3 MBA Mortgage Applications, prior -12.7%
• 2:00 pm: Sep 17 FOMC Meeting Minutes
• 2:00 pm: Sep Federal Budget Balance, est. 50b, prior -344.79b

Central Banks 

• 9:20 am: Fed’s Musalem Gives Welcoming Remarks
• 9:30 am: Fed’s Barr Keynote at Community Banking Research Conference
• 10:00 am: Fed’s Goolsbee Gives Opening Remarks
• 3:15 pm: Fed’s Kashkari Speaks at Center for Indian Country Development
• 4:30 pm: Fed’s Kashkari Hosts Fireside Chat with Senator Tina Smith
• 5:45 pm: Fed’s Barr Speaks on Community Development
• 7:15 pm: Fed’s Goolsbee Speaks at Payments Conference

DB's Jim Reid concludes the overnight wrap

Markets struggled to gain traction yesterday, posting a risk-off move as investors grappled with political uncertainty in France and the US government shutdown. So the S&P 500 (-0.38%) lost ground from its record high on Monday, and 10yr Treasury yields (-2.9bps) also fell back. That concern was clear on several fronts, and investor jitters about France’s debt trajectory pushed the Franco-German 10yr spread to 86bps, the biggest gap since January. Moreover,  spot gold prices have just risen above the $4,000/oz mark for the first time overnight, continuing its relentless rally that’s seen it rise more than 50% so far this year.

In terms of the latest from France, there’s been little sign of any progress being made following PM Lecornu’s resignation on Monday. As a reminder, President Macron gave Lecornu a deadline of tonight to reach agreement among the different political groups, but so far at least there’s been no compromise emerging. Indeed, yesterday there was mounting speculation about another legislative election being called. For instance on Polymarket, it’s suggesting there’s a 67% chance of another election being called, rather than a new PM being appointed, which is up from 49% as we went to press yesterday. And at one point yesterday evening, it even rose as high as 85%.

When it comes to the market reaction, French bonds have continued to underperform, pushing the 10yr spread over bunds up to 86bps. So that’s very close to its peak of 88bps last December when it became clear that former PM Michel Barnier was likely to lose the confidence vote. Indeed, that 88bps level hasn’t been exceeded since 2012, back when then-ECB President Mario Draghi pledged to do “whatever it takes” to save the euro, leading to a big confidence boost that helped spreads come down. To be fair, French equities fared relatively better yesterday, and France’s CAC 40 (+0.04%) stabilised after its Monday slump. However, banks continued to lose ground, including Société Générale (-1.88%), BNP Paribas (-1.15%) Crédit Agricole (-0.21%).

Of course, politics are very much in the spotlight elsewhere, as the US government shutdown shows no sign of ending. In terms of the latest, House Democratic leader Hakeem Jeffries said that proposals to extend the Affordable Care Act tax credits for a year were “a non-starter”. Meanwhile, Republican Senator Susan Collins of Maine told reporters on Monday that she was working on a plan to reopen the government, at least partially, in exchange for a deadline for a discussion on ACA subsidies. But the bigger picture is still concern about an extended shutdown that starts to have a more meaningful economic impact, and on Polymarket, there’s only a 25% chance given to the shutdown ending before October 15.

US equities struggled against that backdrop, and the S&P 500 (-0.38%) fell back after a run of 7 consecutive gains. In part, that was driven by a decline for Oracle (-2.52%), after a report from The Information said that their profit margins for cloud computing were lower than analysts’ estimates. So tech stocks struggled, and the Magnificent 7 (-1.25%) and the NASDAQ (-0.67%) also saw a decent decline. Autos (-4.37%) were the biggest laggard in the S&P, as Tesla (-4.45%) fell after their announcement of a less expensive version of their model Y car and Ford fell -6.1% after the WSJ reported that a plant fire in a New York state aluminum plant will increase costs and cause delivery disruptions. Meanwhile, the outperformers were among the more defensive sectors, with consumer staples (+0.86%) and utilities (+0.42%) both advancing.

As that was happening, Treasury yields fell across the curve, with the 10yr yield coming down -2.9bps on the day to 4.12%. That came as investors slightly dialled up the pace of Fed rate cuts over the months ahead, with 111bps priced in by December 2026, up +2.0bps on the day. Meanwhile, Fed speakers continued to strike a divergent tone. For instance, Fed Governor Miran remained dovish, saying that he was “more sanguine on the inflation outlook than a lot of other people are”. But Minneapolis Fed President Kashkari warned that “Some of the data that we’re looking at is sending some stagflationary signals”.

On that theme, the New York Fed’s latest Survey of Consumer Expectations found that near-term inflation expectations ticked higher in September. So 1yr inflation expectations ticked up to 3.4%, which is their highest since April, and 5yr expectations moved up to 3.0%, which is their highest since February. However, it’s still an open question what will happen with the US CPI report itself on October 15, as it’s a release that will also be affected by the ongoing government shutdown, just like payrolls was last Friday.

Back in Europe, there wasn’t too much happening outside of France, with most assets seeing little change. So the STOXX 600 (-0.17%) only posted a modest decline, alongside steady moves for the DAX (+0.03%) and the FTSE 100 (+0.05%). Similarly for bond yields, there wasn’t too much movement in absolute terms, with yields on 10yr bunds (-1.0bps), OATs (+0.3bps) and BTPs (-0.4bps) seeing little change. There also wasn’t much data, although German factory orders underwhelmed with a -0.8% decline in August (vs. +1.2% expected).

Overnight in Asia, things have been a bit more eventful this morning, with continued movements in Japanese markets after Sanae Takaichi’s election as LDP leader. For instance, the 10yr government bond yield (+1.4bps) has reached a post-2008 high of 1.69%, whilst the yen (-0.30%) has weakened overnight to 152.36 per dollar, its weakest level since February. Meanwhile, the Nikkei (-0.11%) has also lost ground after a run of 4 consecutive gains. That comes as data showed wage growth was softer than expected in August, with nominal wages up +1.5% year-on-year in August (vs. +2.7% expected). And in real terms, wage growth remains negative as it has throughout 2025, at -1.4% (vs. -0.5% expected). Otherwise, there’s been a mixed equity performance in Asia, with the Hang Seng (-1.07%) losing ground, alongside gains for the CSI 300 (+0.45%), the Shanghai Comp (+0.52%) and the KOSPI (+2.70%).

Elsewhere, the main surprise has come from New Zealand overnight, where the Reserve Bank of New Zealand delivered a surprise 50bp cut, larger than the 25bp move expected, which takes their Official Cash rate down to 2.5%. So that’s led to a depreciation in the New Zealand dollar, which has weakened by -0.96% against the US dollar overnight, making it the worst-performing G10 currency. The statement said that the committee “remains open to further reductions”, and New Zealand’s 10yr yield (-4.6bps) has fallen to a 12-month low in response.

Finally, the other big headline overnight has been that spot gold prices have risen through the $4,000/oz mark for the first time. The latest moves come with treasury yields moving lower and the ongoing shutdown, but gold prices have been moving higher throughout the year, having risen by more than +50% since the end of 2024. So as it stands, it remains well on track for its strong annual increase since 1979, when the oil shock that year led to a huge surge in inflation. As a reminder, Marion on our team published an update yesterday (link here) on the future of central banks holding both gold and Bitcoin in their balance sheets by 2030.

Tyler Durden Wed, 10/08/2025 - 08:44

Note: CR is on vacation until Oct 21st.
This is the 21st year I've been writing this blog!
Starting in January 2005, I was very bearish on housing - and in early 2007, I predicted a recession.

However in 2009 I became more optimistic. For example, in February 2009, I wrote: Looking for the Sun (Note: that post shocked many readers since I had been very bearish).

A few years later, in early 2012, when many people were still bearish on housing, I called the bottom for housing: The Housing Bottom is Here

Then I spent a number of years arguing against the recession callers, and the new housing bubble calls. A few examples:
In 2015, I wrote The Endless Parade of Recession Calls

For the last 6+ years, there have been an endless parade of incorrect recession calls. The most reported was probably the multiple recession calls from ECRI in 2011 and 2012.
...
I disagreed with that call in 2011; I wasn't even on recession watch!

And I updated that post several times.
And on housing, over seven years ago, in January 2018, I was quoted in a Bloomberg article:

Bill McBride, who runs the Calculated Risk blog and also called the crash, doesn’t think home prices are inflated this time around. Unlike in 2005, lenders are acting responsibly and the Wild West of real estate speculation hasn’t returned, he said. There is less to speculate on, too. Compared with the overbuilding that preceded the bust, today’s pace of construction isn’t fast enough, he said.

“Lending standards are still pretty good,” McBride said, and he doesn’t expect mortgage rates to “take off” in the short term.

And in December 2018, I disagreed with Professor Shiller A comment on Professor Shiller's "The Housing Boom Is Already Gigantic. How Long Can It Last?". My conclusion:

No big deal, and definitely not a "gigantic" boom in house prices.

In 2021, I wrote: Is there a New Housing Bubble?

The lack of wild speculation doesn't mean house prices can't decline, but it means that we won't see cascading declines in prices like what happened when the housing bubble burst.
...
From a historical perspective, house prices are high. But lending standards have been solid, and we haven't seen significant speculation - so I wouldn't call this a bubble.

Also in 2021, I started my real estate newsletter.  
Note: for $25 you can read the entire archive and one month of daily posts - but make sure you cancel or substack will bill you every month! For $100, you will usually receive 4 to 6 articles per week for a year, you can read the archive and comment on all the posts.
A few key articles:
Housing and Demographics: The Next Big Shift
Housing: Don't Compare the Current Housing Boom to the Bubble and Bust
Household Formation Drives Housing Demand
The Long-Term Housing and Population Shift
Stay tuned!

BMW Shares Post Sharpest Drop In Year After Profit Warning; Citi Flags China Troubles As Potentially "Irreversible"

BMW shares in Germany plunged the most in a year after the company issued a profit warning, citing weaker-than-expected sales in China and ongoing trade uncertainty between the U.S. and the European Union.

The German producer of luxury cars now forecasts its automotive margin for 2025 will be in the range of 5% to 6%, down from its previous forecast of 5% to 7%. 

Here's the snapshot of BMW's new guidance (courtesy of Bloomberg):

• Sees automotive Ebit margin 5% to 6%, saw 5% to 7%, estimate 5.7% (Bloomberg Consensus)

• Sees Automotive return on capital employed 8% to 10%, saw 9% to 13%

• Sees Group Earnings Before Tax Down Slightly, Saw Flat

• Sees Automotive FCF Above €2.5B, Saw Above €5B

Analysts at Bernstein said the downgraded guidance aligns with the consensus of 5.6% but called the update on soft sales in China and tariff-related costs disappointing. 

Other commentary from Wall Street analysts (courtesy of Bloomberg):

Morgan Stanley (overweight)

• Analyst Javier Martinez de Olcoz Cerdan says lowering of volume and margins had been expected, as BMW was the only European auto OEM not to issue a profit warning during 2Q releases

• However, free cash flow is below expectations and could have an impact on dividends

JPMorgan (overweight)

• Narrowing of auto margins appears to be impacted equally by China volume and pricing momentum, Chinese dealer compensation, and higher global tariffs, analyst Jose Asumendi writes

• Sees most of the flagged impacts to earnings and cash flow as temporary, and BMW should be able to claw these back between 4Q25 and 1H26, which maintains confidence in buyback and dividend

• Ability to stabilize volume momentum and pricing power in China in FY26 is seen more important than tariffs in protecting the firm's longer-term competitiveness

Citi (neutral)

• Analyst Harald Hendrikse says China exposure had been a concern, and BMW China issues may be "irreversible"

• BMW, as with many other auto OEMs, appears to be guilty of providing overly optimistic guidance and seemingly has "managed to snatch defeat from the jaws of victory"

• While free cash flow has been cut by 50%, cash return remains solid

Jefferies (buy)

• Pace of China recovery and the timing of tariff implementation had been well flagged, and have now come to pass, analyst Philippe Houchois writes

• Auto margin consensus already in the lower part of the range, with some modest downside risk

It is important to note that BMW's exposure to China is concerning, as FactSet data show it is the automaker's largest market by revenue, at 22%, compared with 19% from the U.S.

In markets, BMW shares in Germany are flat on the year, as the European auto sector sputters in the second half amid numerous issues, such as waning sales in China and an influx of Chinese brands (BYD) entering Europe, which is squeezing market share. 

The Stoxx 600 Autos & Parts Index is down 2% today. Shares are well below the 2024 peak. 

This is concerning...

. . 

Tyler Durden Wed, 10/08/2025 - 08:05

Surveillance Money: The European Central Bank Accelerates The Digital Euro

Authored by Daniel Lacalle,

Many market participants have built long positions on euro-denominated assets, expecting a positive outcome from the German stimulus plan and Rearm Europe projects. However, betting on a stronger euro may be optimistic considering the poor track record of these government plans, the rising fiscal challenges of France and other nations, the elevated debt and enormous unfunded liabilities, as well as the imminent implementation of a central bank digital currency. There are undoubted fiscal and deficit problems in the United States, but the relative position against the euro is undeniably stronger considering all the previously mentioned factors.

The European Central Bank (ECB) has accelerated its plan for a digital euro and recently hired the top global tech companies to create the architecture. However, European banks are rightly concerned, as a central bank digital currency poses significant privacy risks as well as a grave erosion of the capacity of the banking sector to lend and perform adequately.

Central bank digital currencies (CBDCs) can be a dangerous tool for their potential risks to privacy, financial stability, and the concentration of monetary power. In the United States, the Trump administration has issued an executive order banning the use of these instruments, labelling them as “monetary tyranny”.

A CBDC is not the same as electronic money. A digital euro would give unprecedented surveillance capabilities to the central bank. Unlike current electronic payments, a central bank digital currency (CBDC) gives monetary authorities full and direct access to every transaction and savings account, eliminating financial privacy for citizens. This could allow for monitoring, controlling, or even penalising financial behaviours that central authorities may consider undesirable. Furthermore, a CBDC would eliminate the current limits in the financial system that prevent excessive money printing. Bypassing commercial banks and credit mechanisms allows central banks to instantly increase the money supply and finance government spending, eroding traditional budget controls. Removing commercial banks from the monetary system’s transmission mechanism destabilises credit creation and increases the risk of crowding out the private sector.

The main arguments in favour of a digital euro, such as efficiency and enhanced monetary policy transmission, do not withstand scrutiny. None of those benefits require a centralised currency, much less a central bank-controlled monetary monopoly. If those were the real objectives, policymakers would encourage more decentralisation and competition instead of more central planning. The goal is more state control and rapid monetary financing of government spending, not real improvements for consumers or savers.

A CBDC is the evidence that the central bank does not want to strengthen the currency by making it attractive for investors but to impose its use.

In October 2025, the ECB signed framework agreements with ten of the largest technology companies to provide the primary operational and infrastructural components for the planned digital euro, valued at over €1.1 billion. They include companies like Giesecke+Devrient (which makes offline payment solutions), Feedzai (which uses AI to find fraud), Almaviva and Fabrick (which make mobile wallet apps), and Senacor FCS (which makes it safe to share payment information). The framework agreements set the eurozone up for a possible launch of the digital euro by 2029. They cover software development, security, and fraud management.

The ECB says that these agreements are only for planning and that the currency won’t be issued until laws are passed and the next phases of the project are approved. The technology providers will help design and test several technical requirements, such as real-time fraud monitoring and offline use. None of these elements are reducing the widespread concern about privacy, control and erosion of the credit mechanisms as they exist.

European commercial banks are distressed that a digital euro could hurt their main business models, and they are right. Lawmakers in the European Parliament are worried that a retail digital euro could force people to move a lot of money from commercial banks to central bank accounts, which would hurt the sector’s private sector credit origination. The central bank would have access to all citizens’ financial data, raising privacy concerns, even if they “promise” not to use it.

Banks say that a digital euro that is legally deemed free of risk would take funds out of the private financial system, making it harder for financial institutions to lend and prioritising credit to governments over loans to families and businesses. Furthermore, compliance and infrastructure costs are enormous, regulations are unclear and vague, and privacy protections are, at best, undefined.

A CBDC could let central banks watch almost all transactions and financial decisions by citizens, taking away the privacy that comes with cash and giving the government the power to investigate, limit, or even punish users’ financial activities. Central banks can also quickly increase the money supply with a direct digital euro, without the usual limits that come from demand for credit in the banking sector. This eliminates essential limits to inflation and makes monetary policy directly subordinate to political expenditure priorities.

The CBDC will inevitably push commercial banks into a marginal role, creating a dangerous concentration of financial power in the hands of policymakers and technocrats.

The central bank’s independence and the laws guaranteeing privacy provide vague answers to all these concerns. However, centralisation is always a threat, and those laws and their alleged independence are widely questioned when the central bank has consistently bowed down to political pressure to use expansionary monetary tools for government financing. The digital euro is likely to become another tool for rapid, unrestricted fiscal expansion and the subsequent loss of the purchasing power of the currency as the limits offered by banking intermediation are eliminated.

If governments want more efficiency, technology, and a stronger currency that is globally valued, they should encourage decentralisation and competition, not the opposite.

Contracts between the ECB and major tech companies are laying the technical groundwork for a digital euro. Regrettably, privacy and independence receive no priority. The digital euro has serious systemic, economic, and ethical issues and can be used by governments with unsustainable spending and debt problems to debase the currency and use it to finance bloated government projects. European banks are concerned and rightly so. The risk of excessively loosening monetary policy and resulting in complete monetary financing of government spending is significant.

A digital euro is surveillance disguised as money, and governments will do all they can to use it as a tool for direct monetary financing of deficits. If you believe that the same policymakers and governments that have done nothing to control debt accumulation and excessive spending are going to defend the purchasing power of the currency, you are dreaming.

Tyler Durden Wed, 10/08/2025 - 07:45

Chip Equipment Makers Slide After U.S. House Panel’s Explosive Report Reveals Allied Firms Bolstered China's Chip Industry

ASML Holding NV shares tumbled in Europe after a months-long bipartisan investigation by the U.S. House Select Committee on the Chinese Communist Party (CCP), led by Chairman John Moolenaar (R-MI) and Ranking Member Raja Krishnamoorthi (D-IL), published new findings on Tuesday afternoon showing that American, Dutch, and Japanese semiconductor equipment firms have bolstered China's chipmaking capacity, including through sales to Chinese state-owned and military-linked entities.

ASML and other semiconductor equipment makers, including Tokyo Electron Ltd, Applied Materials Inc., KLA Corp., and Lam Research Corp, "made sizeable returns selling equipment to Chinese state-owned and military-linked companies," according to the Select Committee on China. 

The CCP is using technology developed by the US and its western allies to build the chips that power its military, surveillance, and AI-driven authoritarianism.

We must not allow this critical equipment to go to our foremost adversary, or we could lose the technology arms race.

— Select Committee on China (@committeeonccp) October 7, 2025

Here are the key findings from the report:

• Massive Exposure to China: In 2024, Chinese buyers made up 44% of Tokyo Electron's revenue, 42% for Lam Research, 41% for KLA, and 36% for both ASML and Applied Materials.

• Sales to High-Risk Customers: The companies sold tools to five entities already flagged by the U.S. government for ties to China's military and intelligence services, including Huawei affiliates.

• Rapid Revenue Growth From China State-Owned Enterprises: Sales to Chinese state-owned enterprises surged from $9.5 billion in 2022 (11% of total revenue) to $26.2 billion in 2024 (27% of total revenue and 69% of China-based revenue).

• Exploiting Loopholes: As the U.S. tightened export rules, Dutch and Japanese firms ramped up shipments of slightly less advanced lithography systems to China, suggesting CCP stockpiling below restriction thresholds.

Chairman Moolenaar stated that China is "growing its profits at the expense of U.S. national security", adding, "We must not allow this critical equipment to be handed over to our foremost adversary, or America could lose the technology arms race." 

National Security Concerns:

• Military: Chips are powering the PLA's AI-driven "intelligentized" warfare systems.

• Trade: China seeks vertical integration to evade future export restrictions.

• Economic Security: Dominance in legacy and advanced chipmaking could give Beijing global leverage.

• Human Rights: AI and high-performance computing bolster China's domestic surveillance and global digital authoritarianism.

"It makes little sense to sell the CCP the chips they need to modernize their military and violate human rights. But it makes even less sense to sell them the machines and tools they need to produce those chips themselves. This bipartisan investigation reveals that the scale of these sales by Dutch, Japanese, and American firms is even more vast than we realized. Alongside our allies, we need to protect our national security and ensure we remain the world's leading innovators in SME," said Ranking Member Krishnamoorthi.

The investigation concludes: 

"The ability to design and produce semiconductors lies at the heart of the technology competition with China, and SME represents a crucial chokepoint that the U.S. and our allies currently have over China. As the U.S. government works with our allies and partners and plots the course ahead on export-control policy and related actions, this crucial chokepoint must be preserved, not squandered. The U.S. and allies only have the ability to export-control SME because we collectively are the world's leading innovators in SME. We must double down on our success."

Shares of ASML, Tokyo Electron, KLA, Applied Materials, and Lam Research all tumbled on their respective exchanges after the Select Committee on China released its report late Tuesday afternoon.

We doubt the Trump administration will launch a major crackdown on these semiconductor equipment makers just yet, given that President Trump and Chinese President Xi Jinping are scheduled to meet later this month in South Korea. The last thing Washington needs is added turmoil in Sino-US relations before the continuation of in-person trade talks, primarily as Trump officials work to secure a deal and move things forward.

*   *   * 

Read the U.S. House Select Committee on the Chinese Communist Party's (CCP) new report:

 

Tyler Durden Wed, 10/08/2025 - 07:20

Gold Tops $4,000 For The First Time, And How Goldman Is Trading The Meltup From Here

Gold has just topped the $4,000/oz level for the first time ever, cementing its status as the year’s best performing asset and most intriguing story in global commodities, not to mention the most important themes across broader financial markets - one of accelerating and relentless fiat destruction coupled with what Rabobank earlier today called passing the global fiscal event horizon (read letting inflation run amok in hopes of inflating away the $330 trillion in global debt).

Spot bullion climbed as much as 1% to $4,014 an ounce...

... in a milestone moment for the metal that traded below $2,000 just two years ago, with returns that now well outstrip those for equities this century. 

Much of that upside has taken place in 2025 when gold soared more than 50% in the face of continued paper currency debasement and uncertainties over global trade and fiscal stability in the US (people also like adding "Fed independence" here but only idiots believe the Fed was actually independent, ever). At the same time, geopolitical tensions have boosted demand for haven assets, while central banks have continued to buy gold at an elevated pace

The recent re-start of the Fed’s rate cutting cycle has also been a boon for gold, which benefits any time the Fed injects liquidity into the system like now. Investors have responded by piling into exchange-traded funds, with bullion-backed ETFs seeing their biggest monthly inflow in more than three years in September according to Bloomberg, something we predicted well ahead of time.

Think the move in gold is notable? Just wait until the ETFs start chasing pic.twitter.com/SoOXEd2Hdz

— zerohedge (@zerohedge) September 3, 2025

As Bloomberg notes, jumps in the price of gold typically track broader economic and political stresses. The metal breached $1,000 an ounce in the aftermath of the financial crisis, $2,000 during the Covid pandemic, and $3,000 as the Trump administration’s tariff plans washed over global markets in March.

“Gold breaking $4,000 isn’t just about fear — it’s about reallocation,” said Charu Chanana, a strategist at Saxo Capital Markets Pte. “With economic data on pause and rate cuts on the horizon, real yields are easing, while AI-heavy equities look stretched. Central banks built the base for this rally, but retail and ETFs are now driving the next leg.”

Gold’s rally is on pace for its best annual performance since the 1970s, a decade when soaring inflation and the end of the gold standard sparked a 15-fold rally of the precious metal. At that time, Richard Nixon pressured the Fed to lower rates. The central bank under then-chair Arthur Burns was clearly not independent and some speculate that a similar suppression of monetary policy may emerge in the next year when Powell is gone and replaced with a Fed chair of Trump's choosing.

Ahead of the historic breakout, Goldman this morning raised its 2026E gold price forecast from 4,300 to 4,900, a move which the bank believes will still be supported by:

• Central bank buying to average 80/70 tonnes in 2025/2026 (contributing 19pp by Dec26).
• Western ETF holdings to rise as the Fed cuts the funds rate by 100bp mid-2026 (contributing 5pp by Dec26).
• Speculative positioning to gradually normalize (contributing -1pp by Dec26)

Elevated central bank buying is a “structural shift in reserve management behavior, and we do not expect a near-term reversal,” Lina Thomas, Goldman commodities strategist wrote in a September note. “Our base case assumes that the current trend in [central bank] accumulation continues for another three years."

We have been hammering the table for years on gold's disconnect and relentless meltup ever since the Biden admin weaponized the dollar after the Ukraine war, which we now know was meant to cover up the local crimes of the Biden crime family.

Meanwhile, a staggering gap has opened between gold spot, net speculative positions, and total gold ETF holdings. The (physical) east is all in, the (paper) west refuses to wake up pic.twitter.com/InWzVMYacb

— zerohedge (@zerohedge) June 4, 2025

Goldman also sees risks skewed to the upside, as private sector diversification may boost ETF holdings above our rates-implied estimate.

As a result, Goldman's trading desk has proposed a trade to take advantage of the coming meltup with 10x leverage. 

How To Trade (from GS Sales & Trading)

Buy a 6m XAU Binary call with 10x Payoff (indic 4700 strike, off spot 3960) 

• Limited Loss (Given lack of COT data or Economic Data, significant run in recent weeks leaves room for a pull-back so we prefer to trade through optionality than one-delta)
• Exposure to Upside Convexity (6m Gold Vol is at 17v, 3v off the April tariff highs while 10d callskew is in the 20th percentile vs the precious 10 years, which makes wingy upside relatively cheap).
• No knock-outs (due to the cheap callskew, price knock-outs are not especially cheapening and sell upside tails. This ensures maximum exposure to price rallies).

Goldman's full gold report available here for pro subs.

Tyler Durden Wed, 10/08/2025 - 07:15

Greece Still Has The Highest Debt-To-GDP In Europe; Bulgaria The Lowest

As European countries pour billions into defense spending, their debt piles are expanding—raising questions of national fiscal stability.

In France, a rising debt ratio led Fitch to downgrade its credit rating in September. The country has faced ongoing political turmoil as the country’s debt supply recently hit a record $4 trillion.

This graphic, via Visual Capitalist's Dorothy Neufeld, shows European Union debt-to-GDP by country, based on data from Eurostat.

The State of European Union Debt-to-GDP in 2025

Below, we show general government gross debt as a percentage of GDP as of Q1 2025 in the EU:

While Greece’s economy is thriving in 2025—supported by tourism, real estate, and shipping sectors—its debt situation continues to rank as the worst in the EU.

However, its debt-to-GDP ratio has steadily fallen in recent years, from 180% in 2022 to 153% today. Given its recent economic momentum, the country launched an innovation and infrastructure fund with BlackRock designed to attract $1.2 billion in foreign investment.

Italy holds the second-highest debt-to-GDP ratio in the EU, at 138%. However, the country has made notable progress in narrowing its deficit, cutting it from 7.2% of GDP in 2023 to 3.4% in 2024 on the back of strong tax revenues. Like Greece, its debt levels have been gradually trending downward.

By contrast, debt is rising in France, where it stands at 114% of GDP. In efforts to combat its deteriorating fiscal situation, the French government has raised the retirement age, and proposed cutting two national holidays—stoking public outrage.

Meanwhile, Germany’s debt ratio of 62% falls significantly below the EU average of 82%. At the same time, the country has eased its fiscal rules with massive defense spending, causing debt levels to rise.

To learn more about this topic, check out this graphic on debt to GDP by country worldwide.

Tyler Durden Wed, 10/08/2025 - 06:55

US Bitcoin Reserve Funding "Can Start Anytime" - Senator Lummis

Authored by Brian Quarmby via CoinTelegraph.com,

Crypto-friendly US Senator Cynthia Lummis has confirmed that acquiring funds for the US Strategic Bitcoin Reserve (SBR) can “start anytime” now, though legislative red tape is holding it back. 

In an X post on Monday, Lummis said that while it remains a “slog” on the legislative side of things, thanks to “President Trump, the acquisition of funds for an SBR can start anytime.” 

Lummis made the comments in response to a post from ProCap BTC chief investment officer Jeff Park, who shared a video of himself and Bitcoin bull Anthony Pompliano discussing the potential of the Strategic Bitcoin Reserve. 

Senator Lummis’ latest comments on the SBR. Source: Cynthia Lummis

Park was hypothesizing what would happen if the government were able to utilize its $1 trillion worth of paper gains from gold to reinvest into Bitcoin. 

He argued that, given the government’s approximately $37.88 trillion in fiscal debt, utilizing the $1 trillion in paper gains would be a relatively minor risk in the grand scheme of things. 

“And so if there’s a way to unlock the ability to build leverage on the paper gains of gold to take a call option on Bitcoin. There’s something incredible here that could happen… If you own Bitcoin, and you assume that it’s going to go up by 12% a year, you’ll make a 30x in 30 years,” he said.

“It’s actually going to be able to cover most of the fiscal deficit hole that exists.”

In response, Lummis stated that this was “a fabulous articulation of why the SBR and passing the BITCOIN Act makes so much sense.”

It is not yet clear exactly how capital will be raised for the Strategic Bitcoin Reserve. According to the official government fact sheet, the reserve will initially be “capitalized with Bitcoin owned by the Department of Treasury” that was seized through civil or criminal proceedings. 

Then it states that additional BTC may be acquired via budget-neutral avenues that “impose no incremental costs on American taxpayers.”

Government Bitcoin buys around the corner? 

It has been seven months since President Donald Trump signed an executive order to establish the Bitcoin reserve. However, the concrete formulation of the reserve is yet to be confirmed, resulting in a fair amount of speculation and debate around the exact launch timeline. 

Some, however, anticipate that the government may announce some BTC purchases in the near future. Speaking with CNBC over the weekend, Anthony Pompliano said there are three key things the market is keeping an eye on right now: 

“The first is that the US government at some point is gonna announce that they are buying Bitcoin. Creating the initial kinda strategic reserve and sitting the Bitcoin we already had there was good. But that’s kinda not the main dish.” 

“The main dish is when they start buying, and I think that will happen at some point.”

Tyler Durden Wed, 10/08/2025 - 06:30

Goldman: $10,000 Is New Price Floor For Copper 

Copper futures on the London Metal Exchange are near record highs as traders weighed supply disruptions at major mines, the Federal Reserve's interest rate outlook, the ongoing U.S. government shutdown, and demand outlooks tied to power grid upgrades and AI-related growth. 

Focusing on copper prices, a team of Goldman analysts led by Eoin Dinsmore told clients on Monday that the industrial metal is entering a new structural price range of $10,000 to $11,000 per ton.

Dinsmore's thesis is clear:

We believe that the copper price is resetting in a new range of $10,000-$11,000/t - a range copper has never held for longer than two months - as resource constraints and structural demand growth from critical sectors set a new price floor from 2026 onward. We lift our 2026 copper price forecast to $10,500/t (from $10,000) following the Grasberg outage, also supported by U.S. Fed rate cuts and further U.S. dollar depreciation, and maintain our $10,750/t 2027 forecast.

While we are bullish on copper prices vs. historical averages and the 2027 forwards, we believe that there is a ceiling at $11,000 for the coming two years. The copper market is currently in a modest surplus, which we expect to be maintained in 2026, even after a significant drop in global refined output following recent mine disruptions. We do not see a deficit materialising until the end of the decade.

The commodity analyst outlined three reasons why copper should trade in the $10,000 to $11,000 range through 2027:

1. Mine supply is constrained, but enough to meet demand for now: Multiple recent mine incidents highlight the growing structural challenges in copper mining as copper mines get deeper, grades get lower and ore gets harder, requiring greater investment. This caps our mine supply growth forecast at an annual average of +1.5% YoY in 2025-30. While high copper prices are already delivering investment in China, DR Congo, Russia, and Uzbekistan, which we believe will be enough to meet demand over the next two years, a price above $10,500 is needed to incentivise investment in brownfield South American mines, required to balance the market later in the decade. Meanwhile, we expect a pick up in copper scrap use to help delay any deficit in the copper market until later in the decade, likely limiting copper price upside beyond $11,000/t in 2026/27.

2. Structural demand growth from critical sectors moderated by accelerated substitution in cyclical sectors: We forecast global refined copper demand growth to moderate from +2.8% YoY in 2025 to an average of +2.1% YoY in 2026-2030. We continue to see grid and power infrastructure driving over 60% of the growth in our forecasts, with additional direct boosts from defense, electric vehicles, wind and datacenters. Importantly, we see investment in aging Western power grids as a national security priority, due to its critical role in AI, defense and energy security. However, we also forecast accelerated copper to aluminium substitution in cyclical sectors, which slows copper demand growth and keeps the market in small surplus. This substitution contributes to copper pricing into a higher range, rather than an open-ended rally.

3. Strategic Stockpiling: Given copper's dual nature of constrained resources and essential use in critical sectors, it is a compelling commodity to strategically stockpile. This means that even as our balance implies that the market will remain in a small surplus over the coming years (vs our leaning towards a small deficit previously), this inventory build is likely to be at least partly absorbed by strategic stockpiles, limiting the visible stockbuild and downward pressure on exchange prices.

Dinsmore expects prices to remain above $10,000 for the remainder of this year, primarily due to Freeport-McMoRan's force majeure declaration on contracted supplies from its giant Grasberg mine in Indonesia, the second-largest source of the metal, following a mudslide last month. 

At the time, Goldman's commodity specialist, James McGeoch, called the event a "black swan event" (see the report)...

Dinsmore noted, "The global copper market to move into deficit by the end of the decade." 

Copper Price Already Near Top End of Goldman's Price Anchors

When to Expect the Deficit

The note includes tons of charts and an in-depth analysis of global copper markets, outlining what to expect through the end of the decade. ZeroHedge Pro Subs can read the full report in the usual place.

Tyler Durden Wed, 10/08/2025 - 04:15

Egypt Wants US Troops In Gaza As Part Of Peacekeeping Mission

Via Middle East Eye

US troops will need to deploy to Gaza if the international force of peacekeepers that President Donald Trump's ceasefire plan envisions is to become a reality, Egypt has told the US, according to two Arab officials who spoke to Middle East Eye.

Senior Egyptian officials told their US counterparts that they want the International Stabilization Force outlined in Trump’s 20-point peace plan to be modelled on the Multinational Force and Observers (MFO) that deployed to Sinai after the peninsula was returned to Egypt from Israel in 1982. The US has led the MFO since its inception, supplying hundreds of troops as a buffer and reassurance force.

Via AFP

Trump's plan envisions the international force made up of Arab and Muslim states securing Gaza as Israel withdraws. Egypt, the only Arab country that borders Gaza, is set to play a key role in the force, as it is home to the Arab world's largest army.

Egyptian military intelligence also has ties with Hamas's armed wing, the Qassam Brigades.  MEE reported earlier that Hamas wants Turkish troops to deploy to Gaza to guarantee the ceasefire, but the two Arab officials and a former senior US official said Israel objects to a Turkish presence.

The Egyptian request, which has been communicated publicly and privately, is likely to test Trump's appetite for a deeper military footprint in Gaza. One former senior US official familiar with the request said it was a nonstarter.

However, there are some signs that the US is preparing for a bigger military footprint in Israel's neighborhood already. US military personnel at the Al-Udeid airbase in Qatar have shifted to Jordan for the coming months, one Arab official told MEE.

The military personnel belong to risk and security assessment teams, effectively managing security at the US military base. Current and former US and Arab officials told MEE that the move could signal the US is preparing for more troops to arrive in the region. Trump's plan has listed Jordan and Egypt as key security partners in Gaza.

The deployment of US troops to Gaza is just one of many sensitive points that negotiators meeting in the Egyptian resort town of Sharm El-Sheikh this week have to address to end Israel's war on Gaza as it approaches the two-year mark.

Arab and Muslim countries were angered when Trump unveiled his plan last week. Although he recognized two of their key demands - a permanent end to the war and no forced displacement from Gaza - he did not commit to a Palestinian state and left room for Israel to stall its withdrawal from Gaza.

Egypt was especially upset that Trump downplayed the role of the Palestinian Authority, MEE reported. But the US's Arab and Muslim partners are backing the plan. Trump prides himself as a negotiator, and analysts and diplomats say much is still up for discussion this week in Egypt.

'Skin in the game'

Trump called on Sunday for mediators to "move fast" to reach an agreement after he welcomed Hamas's response to his proposal as a pathway for a deal. Hamas, Egyptian, Qatari, Turkish, US and Israeli officials are participating in the talks, Arab officials told MEE.

The plan calls for the quick release of all remaining Israeli captives in Gaza - roughly 20 are still alive - in exchange for Palestinian prisoners.

Hamas and Israel have orchestrated prisoner exchanges before, including during a ceasefire in January that collapsed two months later when Israel unilaterally resumed attacking Gaza. If all goes according to plan this time, the first phase of the deal, the captives' release, would be over in 72 hours, although analysts warn it could take longer for Hamas to locate the living and dead captives.

One central sticking point in the talks is the timeline for Israel's withdrawal. Trump's plan provides no specific deadline and leaves Israel space to remain deep inside Gaza.

Egypt, Qatar and Turkey are pressing for a complete withdrawal, Arab officials told MEE. Hamas is expected to insist that Israel withdraw to a narrow buffer zone around Gaza before fully leaving the enclave. 

Arab leaders whose armies are expected to partake in the international peacekeeping force don't want their soldiers rubbing shoulders with Israelis among the ruins of Gaza. Nor do they want to be seen as providing cover for Israel if it unilaterally resumes attacking Gaza.

Egypt, which is likely to contribute the bulk of soldiers, is especially worried, Arab officials told MEE. "For the Egyptians, a US presence would represent an actual commitment to the plan in real terms; troops and funds. It would be viewed as skin in the game, a tangible embodiment of US support, and, potentially, an incentive for Israel to curb violations," Mirette Mabrouk, who is currently in Cairo and heads the Middle East Institute's Egypt programme, told MEE.

"Although the attack on Doha proved that US presence is no automatic safeguard against Israeli aggression," she added, referring to Israel's attack on the Qatari capital in September.

Egyptian intelligence has been in talks with Hamas's armed wing about disarmament, which is stipulated under Trump's plan. It has been a source of growing tension between the Palestinian movement and Cairo. One of the Arab officials familiar with the talks told MEE it was "difficult".

Several options have been reported, including Hamas turning its arms directly over to Egypt and storing them. The Wall Street Journal reported that Hamas wants to keep its small arms, which it considers defensive. 

Riccardo Fabiani, the North Africa project director at the International Crisis Group, told MEE that in addition to "containing Israel", Egypt wants US troops on the ground to be able to verify the handover of weapons - which Israel could use as a provocation to restart attacks. "They want the US to participate in whatever disarmament process is going to take place," he said.

"I don't see this administration particularly interested in having permanent troops involved in peacekeeping. They prefer bombing a place and getting out," he said.

Trump's plan rules out Hamas governing Gaza. It calls for a "Board of Peace" led by Trump to govern the enclave alongside Palestinian technocrats.

Tyler Durden Wed, 10/08/2025 - 03:30