Citadel Eyes US Shale As Oil Trading Moves Closer To The Wellhead

Authored by Julianne Geiger via OilPrice.com,

Citadel is shopping for U.S. oil production assets, including a previous bid for WildFire Energy before Magnolia Oil & Gas agreed to buy the Eagle Ford producer for $4.06 billion.

Reuters reported Friday that the hedge fund and commodities trader has held talks with several private-equity owners of oil-weighted exploration and production companies in recent weeks.

WildFire would have given Citadel roughly 53,000 barrels of oil equivalent per day of production, about 70% of it oil, plus 810,000 net acres in South Texas. Magnolia ultimately won the auction in July.

Citadel already trades oil, natural gas, power, and other commodities. It also already owns natural gas production. The firm bought Paloma Natural Gas from EnCap Investments in 2025, renamed it Apex Natural Gas, and added more assets from Comstock Resources and Azul Resources.

Oil would give Citadel another physical position behind its commodities trading business.

U.S. shale has become particularly attractive this year because its barrels do not need the Strait of Hormuz, Bab el-Mandeb or another overseas chokepoint to reach Gulf Coast refineries and export terminals. Middle East disruptions have kept crude prices elevated and pushed U.S. producers to some of their strongest earnings in years.

That geography is something Citadel founder Ken Griffin was already worried about months ago. In April, Griffin warned that a six-to-12-month Hormuz closure would push the global economy into recession. His concern was straightforward: sustained oil shortages would raise energy costs, inflation and transportation costs across the global economy.

Owning U.S. production gives a commodities firm direct exposure to the barrels that become more valuable when overseas supply gets disrupted.

Citadel would hardly be alone. Vitol built and later sold its VTX Energy Partners shale business. Gunvor has been pursuing more than $1 billion of Haynesville gas assets.

Private-equity-backed shale producers have traditionally been sold to larger drillers looking for acreage and scale. Citadel's interest adds another class of buyer: firms that already make money trading the price of oil and increasingly want ownership of the oil itself.

Tyler Durden Sat, 09/05/2026 - 17:30

DeepSeek's 160,000 Huawei Order Is A Real Threat To Nvidia In 2027

Roughly 350 kilometers northwest of Beijing, in the city of Ulanqab, DeepSeek is constructing a data center measured in gigawatts. Running at full capacity, the site would draw enough power to supply 750,000 homes. On Friday, Bloomberg reported that DeepSeek intends to fill a portion of this massive footprint with at least 160,000 of Huawei's newest AI processors, the Ascend 950DT. Once operational, it will stand as the largest known cluster of Chinese-made AI silicon in the world.

Yet, Huawei's processors have a notoriously poor track record when it comes to the heavy lifting of training AI models - a limitation DeepSeek experienced firsthand with the previous chip generation. Instead of building models from scratch, the Huawei chips will be relegated to inference: running DeepSeek's finished models to generate answers for end users. That is not the consolation for Nvidia it sounds like. Inference is the larger pool of compute, the faster-growing one, and increasingly the one that pays - and Huawei has just taken the biggest inference order in China.

What The Chips Won't Do

Every AI model leads a double life. The first phase is training: a grueling, months-long process where tens of thousands of chips work in perfect synchronization, digesting vast swaths of the internet to learn how to predict the next word. The second phase is inference, which encompasses everything that follows - answering chatbot queries, writing code, or summarizing documents. Training determines who holds the technological crown, but inference drives the sheer volume of compute and, increasingly, the revenue.

When Huawei laid out its roadmap last September, it positioned the 950DT as a dual-threat capable of both training and inference. However, Bloomberg's sources indicate DeepSeek has zero intention of using it to train. Last year, buckling under pressure from Chinese authorities to adopt domestic hardware, DeepSeek spent months attempting to train its R2 model on older Ascend chips with on-site Huawei engineers. According to the Financial Times, the effort failed to yield a single successful training run. DeepSeek ultimately reverted to Nvidia for training, keeping Huawei strictly for inference. A year later, and a full hardware generation newer, Friday's report confirms that division of labor remains intact.

This means China's premier domestic chip has successfully captured the inference market, but remains locked out of the training arena. Ironically, this is precisely the boundary U.S. export controls were designed to enforce. Four years of restrictions were intended to block China from training frontier models; Washington never actually set out to prevent them from running finished ones.

What Nvidia keeps in China, meanwhile, barely counts. Its remaining Chinese training demand is fueled by rented overseas compute and alleged smuggling routes, and neither pipeline shows up on Nvidia's balance sheet as legitimate Chinese revenue. The segment Huawei has taken is the one that books.

Huawei Can't Fill It

One issue - Huawei simply cannot manufacture these chips fast enough. According to Bloomberg, severe shortages of top-tier memory will bottleneck 950DT production to the low hundreds of thousands this year. Huawei is actively juggling DeepSeek's massive order against other domestic clients and a fledgling export initiative, meaning it could take well over a year just to fulfill this single contract. DeepSeek has even petitioned Beijing to pressure Huawei into accelerating deliveries.

The root of this bottleneck lies in a component often overlooked in AI coverage. An AI accelerator is only as fast as the high-bandwidth memory (HBM) stacked alongside it. The companies that matter here are South Korea's SK Hynix and Samsung, and the U.S.'s Micron. When Washington severed China's access to advanced HBM in December 2024, Huawei had to pivot to developing its own. The 950 series is the first Ascend generation to feature this in-house memory, and Bloomberg's sources confirm it is exactly what is crippling output.

China's national champion is having its flagship chip rationed by the state, while the nation's most prominent AI lab waits in line begging for a larger allocation. To put this in perspective, Bloomberg reported last year that Huawei's entire 2026 production target is roughly 1.6 million Ascend dies - enough for about 600,000 of the older 910C chips and a scattered mix of newer silicon. Furthermore, the 950DT is generally considered to be on par with Nvidia's Hopper generation (the H100s that fueled the 2023 AI boom). By the time DeepSeek's cluster is fully operational in late 2027, more than a year from now, Nvidia will be two full generations ahead in training - a race Huawei is no longer running.

A Fraction Of The Site

The bigger open question is scale. Bloomberg emphasizes that 160,000 950DTs will constitute "only one chunk" of the gigawatt-scale facility in Ulanqab. What will occupy the rest of the site remains a mystery.

When Elon Musk's xAI activated its initial 100,000 Nvidia H100s in Memphis in 2024, the cluster required roughly 150 megawatts of power. Applying that ratio to 160,000 Hopper-class Huawei chips yields a footprint of about 250 megawatts - roughly a quarter of DeepSeek's planned gigawatt, or perhaps a third if the 950DT proves more power-hungry than Nvidia's hardware (a metric Huawei keeps under wraps). Regardless of the exact math, the vast majority of the gigawatt site is unaccounted for.

Washington has its own theory regarding the missing hardware. In February, a senior Trump administration official claimed that DeepSeek trained its latest model on Nvidia's Blackwell chips - current-generation hardware strictly banned from entering China - and suggested these chips are likely housed at the Inner Mongolia facility. "We're not shipping Blackwells to China," the official stated, though they declined to elaborate on how DeepSeek procured them. DeepSeek did not respond to Reuters' requests for comment at the time. While Washington has repeatedly accused both DeepSeek and Moonshot of relying on smuggled Nvidia silicon, Bloomberg notes it hasn't independently verified these claims.

The Huawei order is the narrative Beijing wants public, while the Blackwell smuggling allegation is the narrative Washington wants public - and neither explains the true scale of the Ulanqab facility. 

Beijing Is The One Saying No

In December, the Trump administration cleared Nvidia to sell its H200 chips - the crown jewel of the Hopper generation - to vetted Chinese buyers, provided the U.S. Treasury received a 25 percent cut. The Commerce Department formalized this rule in January, and Bloomberg reports the administration was ready to authorize the export of up to a million chips. Beijing has approved a fraction of that volume.

Given the options, Chinese tech giants still prefer Nvidia. Both Alibaba and Tencent placed massive orders the moment U.S. restrictions relaxed, and Chinese firms continue to rent top-tier Nvidia compute by the hour from unregulated overseas data centers. The true blockade is being orchestrated in Beijing - as the Chinese government is aggressively weaning its domestic labs off foreign silicon, restricting Nvidia imports, and forcefully pivoting the industry toward Huawei.

So - Huawei is not winning Chinese inference on price and performance. It is winning on quota - which makes the threat to Nvidia a policy instrument rather than a product, and a far harder thing to compete against. 

Nvidia CEO Jensen Huang has warned for years that U.S. export controls would inevitably forge a self-sufficient Chinese chip industry. His prophecy is now being fulfilled - by the Chinese government itself. Regardless of what Washington permits, Beijing acts as the ultimate gatekeeper, utilizing import quotas to force its most critical AI labs to adopt Huawei hardware for their fastest-growing workloads.

Tyler Durden Sat, 09/05/2026 - 16:55

With Its War On Prediction Markets, The Gaming Lobby Plays A Bad Hand

Authored by Dean Heller via RealClearMarkets,

There's a saying in Vegas, the house always wins. I represented Nevada in Congress for more than a decade and I can attest to the truth behind that phrase. But what I learned is that it's rarely a fair fight. The gaming industry works to stack the odds against competition, whether it's at the tables, in courtrooms, or in the halls of Congress.

It was never a fair fight, which is why the gaming industry is so worried about prediction markets. Prediction markets are far from perfect, but they're fair. There is no house. It's no wonder the gambling industry is working overtime to stop them. Recently, the American Gaming Association tried to join a lawsuit in Wisconsin against the CFTC, and its lobbyists went to Congress this week asking for an outright ban on sports event contracts.

While representing Nevada, I sat on the Senate Finance and Banking committees, and whipped votes to protect our gaming industry from anything that smelled like competition. When Sheldon Adelson wanted a federal ban on online gambling, I backed the Restoration of America's Wire Act and warned that internet gaming would be "a final nail" for brick-and-mortar casinos. Looking back, I was probably being a little dramatic. The bill failed anyway, in large part because opponents argued it would cost states an economic boost and push bettors toward unregulated offshore sites.

So when I watch the gaming lobby go to war against prediction markets today, I recognize the play. I ran it.

The industry has launched a multi-state litigation campaign, fired off cease-and-desist letters to stop sports event contracts, and cheered as 41 state attorneys general urged the CFTC to cede jurisdiction over these markets to the states. In certain states, lottery and gaming agencies are colluding with the American Gaming Association. When your state gaming agency and the casino lobby are copying each other's homework, it's fair to ask who's actually regulating whom.

Here's what makes the crusade hard to take seriously. While the casinos lecture Washington about consumer protection, a lawsuit in Philadelphia is showing the country how the sportsbook business actually works. A gambler named Terry Thompson wagered roughly $18.5 million on FanDuel and lost more than $1.5 million. He was a "VIP." His reward for all that losing? His FanDuel host arranged a personalized Cameo video from Phillies star Bryce Harper, who says he never consented and thought he was recording a holiday greeting. Thompson is now suing FanDuel for feeding his addiction, and the Pennsylvania Gaming Control Board is reviewing sportsbooks' use of celebrity messages to keep high rollers betting.

Think about the business model that produces that story. Sportsbooks make money when customers lose. So the customers losing the most get the white-glove treatment, and the ones who win too much get shown the door.

There's a reason prediction markets can be straight with their customers in a way sportsbooks can't. An exchange collects a small fee on every trade, win or lose, so no revenue rides on anyone's losing streak. When a platform's paycheck doesn't depend on a customer going broke, it can step in at the signs of trouble, the repeat losses and the chasing, without touching its own bottom line. And instead of fighting oversight, this industry keeps asking for more of it.

Some of these markets, like Kalshi and NADEX, are federally regulated, based in the United States, and volunteering to pay state taxes. North Carolina just passed a law recognizing federal oversight and taxing prediction market revenue, which was smarter than burning taxpayer money in court and inconvenient for the claim that these platforms cost states money. New Jersey came close to taxing prediction markets this year, and the loudest opposition came from the union representing Atlantic City's own casino workers, who argued that taxing prediction markets would "legitimize" a competitor to their industry. They'd rather forgo the tax revenue than admit prediction markets are here to stay.

My advice to my old friends in gaming is the advice I wish someone had given me during the Wire Act fight: innovate, don't litigate. The knee-jerk lawsuits didn't stop sports betting, tribal gaming, or the internet, and they won't stop this. I love Las Vegas. It's one of my favorite places on earth, and there's plenty of room for everyone. Let consumers decide.

After all, this is the town that will take a bet on anything. Funny that the one wager it won't touch is a fair fight.

Tyler Durden Sat, 09/05/2026 - 16:20

Under-The-Radar Oklahoma Bitcoin Mining Site Condemned After Leaking 3 Million Gallons Of Water

A massive water leak in El Reno, Oklahoma has brought new scrutiny to a Bitcoin mining operation that city officials say had been operating without required approvals and in violation of multiple building and safety codes, according to KFOR 4. Three million gallons of water were leaked, according to KOCO ABC. 

The facility, operated by Athlon BT LLC, had largely escaped public attention until the leak was discovered. City officials say the company had also installed a fire hydrant without their knowledge, while questions remain about how water was being used at the site.

Athlon originally applied for building permits in 2022. By 2023, however, El Reno had issued a stop-work order after the permits expired and officials identified multiple fire and life-safety code violations. The company was given until December 2023 to address the problems, according to the city.

Instead, officials say Athlon continued construction and eventually began operating the facility despite lacking the inspections and final certificate of occupancy required by the city. Officials have cited problems involving electrical systems, drainage and other areas of the property.

“They really weren’t in compliance at all,” city spokesperson Lyndsay Bayne said.

The discovery came as a surprise not only to residents but also to local officials, who said the Bitcoin mining operation had attracted little attention before the leak, according to KFOR 4.

Athlon had previously described the structures on its website as “mobile data centers.” The operation, however, differs considerably from the large hyperscale data centers proposed in communities such as Yukon and Piedmont, which have generated debate over their potential demands on local infrastructure and water supplies.

The KFOR 4 report says that El Reno officials say Athlon told the city its equipment was air-cooled and therefore should not have required water for cooling. According to the city, the water line involved in the leak was supposed to serve only a fire hydrant.

That hydrant itself has raised additional questions. Officials say Athlon installed it behind the property without notifying the city, and it did not appear on municipal records. The hydrant was also reportedly concealed beneath a large pile of brush.

KFOR later observed above-ground piping that appeared to connect the mobile data center units and extend toward the hydrant. Athlon’s website, before becoming unavailable, also referenced what the company called “hydro-cooling technology.” Those details have prompted questions about whether the water line may have served a purpose beyond fire protection.

Photo: KOCO ABC

KFOR reported that its attempts to obtain an explanation from Athlon have gone unanswered. Calls and emails to the company received no response, and its website subsequently displayed a maintenance notice.

After the water leak was discovered, El Reno condemned the property.

The episode is unfolding amid a broader debate over data center development in Oklahoma, although city officials have stressed that Athlon’s Bitcoin mining operation should not be confused with the much larger data center projects being proposed elsewhere.

“El Reno doesn’t have any large data centers or any plans to have any large data centers,” Bayne said. “This was completely under the radar.”

The city has since strengthened its rules governing future data center developments. A recently adopted ordinance requires proposed data centers and large artificial intelligence facilities to undergo greater scrutiny and provide an opportunity for public comment before they can move forward.

For residents concerned about the strain such facilities could place on local resources, the Athlon controversy has added urgency to calls for stronger oversight. The unresolved questions surrounding the company’s permits, infrastructure and water use are also likely to keep the Bitcoin mining operation under scrutiny as city officials determine how the facility was able to operate for so long without full compliance.

Tyler Durden Sat, 09/05/2026 - 15:45

FICO Crashes As Trump Housing Chief Pulte Cracks Mortgage-Score Monopoly

"Equifax, Experian, and TransUnion have been overcharging Americans for far too long," Federal Housing Finance Agency Director Bill Pulte wrote on X late Thursday.

The Trump administration's campaign against the cost of credit scores and reports used in the mortgage industry sent shares of Fair Isaac, the company behind FICO scores, as well as Equifax and TransUnion, tumbling on Friday morning.

Pulte continued: "This will end soon. We are seriously considering bi-merge, and stronger solutions (SAFER and SOUNDER). We will not allow companies to take advantage of American consumers. No more."

Equifax, Experian, and TransUnion have been overcharging Americans for far too long. This will end soon. We are seriously considering bi-merge, and stronger solutions (SAFER and SOUNDER). We will not allow companies to take advantage of American consumers. No more.

— Pulte (@pulte) September 4, 2026

Pulte's warning was accompanied by a Reuters report that mortgage giants Fannie Mae and Freddie Mac will allow all lenders to use VantageScore, a competing credit-scoring model, expanding a rollout across 50 lenders.

The move to lower costs for homebuyers and boost competition in the mortgage credit-scoring market, which FICO dominates, is seen by the market as a direct challenge to FICO's long-standing dominance.

Ashish Sabadra, an equity-research analyst at RBC Capital Markets, provided clients on Friday morning with more details about the industry implications following Pulte's X post:

Assessing the Impact on Credit Bureaus (EFX/TRU/EXPN) and FICO

Our view: Tweet from FHFA Director Bill Pulte suggests the agency is seriously considering permitting bi-merge credit reports for conforming loans. If fully adopted across the mortgage market, this shift could negatively impact up to one-third of mortgage inquiries. Beyond volume loss, the move would also introduce greater competition in mortgage credit reporting, a dynamic we will monitor closely for signs of pricing pressure.

Regarding bureau-level impact, EFX carries the greatest mortgage exposure given its mortgage solutions and income and employment verification businesses, though these same assets also present meaningful bundling opportunities. However, with the remaining third-party resellers estimated to control 75%+ of the market, these players may preferentially gravitate toward TRU and EXPN. EXPN has the least mortgage exposure among the three bureaus and would likely face the smallest revenue headwind from this potential regulatory change.

Separately, Bill Pulte also tweeted that, effective immediately, he is instructing Fannie Mae and Freddie Mac to approve all lenders to use VantageScore. VantageScore adoption has already gained meaningful traction, with VS4 market share reaching approximately 25% at UWM and ~34% at Rocket through August 25th. However, while 50 lenders participated in the pilot program, Fannie Mae data indicates that only four mortgage lenders were actively issuing VantageScore loans. Pulte's directive to open adoption to all lenders would therefore represent a significant broadening of the program. 

Mortgage exposure: In 2025, Mortgages represented ~21% of EFX's revenues, with mortgage credit reports and mortgage solutions collectively accounting for ~11% of total revenues, or 32% of USIS revenues. For TRU, mortgage exposure stood at ~13% of total revenues, representing ~35% of US Financial Services revenues. EXPN has comparatively limited exposure at ~4% of total revenues.

Background. FHFA Director Bill Pulte announced last night that effective immediately, Fannie Mae and Freddie Mac have been instructed to approve all lenders to use VantageScore as an eligible credit scoring system. The directive follows a successful initial rollout in which 50 lenders delivered loans using VantageScore under the program.

In a separate post, Pulte stated that EFX, TRU, and EXPN are overcharging American consumers and that he is seriously considering a bi-merge credit pull requirement for conforming loans, as well as structural reforms.

Fair Isaac crashed as much as 21%, its sharpest intraday decline since March 2020 if losses sustain through close. Equifax and TransUnion each tumbled as much as 11%.

Separately, TD Cowen analyst Jaret Seiberg told clients that Pulte's attack on ​​​​​​mortgage-related costs could support the administration's affordability message ahead of the midterm elections this fall.

Tyler Durden Sat, 09/05/2026 - 14:35

The Soft Antichrist Of The AI Age: What Everyone Is Missing About The US-China Arms Race

Authored by Patrick Feeley via Substack,

I. The word

Peter Thiel spent the back half of last year giving private lectures on the Antichrist, and the word has been loose in the discourse ever since. His political reading is the old one. The Antichrist is not a cartoon devil. He is the figure who arrives offering peace and safety, and who uses the fear of catastrophe to install one universal order. In Thiel's telling that figure is a regulator. He stops technology in the name of survival. The price of the peace is stagnation.

I want the frame. I do not want his conclusion.

The more probable figure is not the one who promises safety. It is the one who promises growth. Most of the world does not lie awake about existential risk from machine intelligence. It lies awake about electricity, logistics, credit, tax collection, and a median citizen who is twenty four and needs work. To that world the universal offer is not a moratorium. It is a stack. Cheap. Financed. Hosted. Present. Already attached to the handsets, the ports, and the power.

That is the soft Antichrist. It does not arrive with a speech about ending history. It arrives as the only AI that can grow your GDP.

I am not writing theology. I am writing underwriting.

II. The comforting story

The market is telling itself a story. The AI race is a contest of models. America builds the best systems. China copies. Europe regulates. Capital therefore clusters around closed labs, chipmakers, and hyperscale cloud. The scoreboard is a benchmark table.

That story is not false. It is incomplete in a way that misprices power. It treats the richest customers as the only customers that matter. It treats evaluations as destiny. It treats national power as a software demo.

I disagree.

The race will be decided by who becomes the default operating system for the economies that still have the most growth left. Those economies will not adopt AI as a lifestyle product. They will adopt it as a growth tool. They will take the stack that is cheap, present, financed, and attached to what they already run. If that stack is Chinese, Beijing does not need to conquer anyone. It only needs to become expensive to leave.

III. Where the mass actually is

When Sargasso maps AI adoption across emerging GDP rather than across model releases, the picture is not the one the market is priced for.

Start with the denominator. On purchasing power terms, IMF projections for 2026 put China at about $44.3 trillion against $32.4 trillion for the United States. India is near $18.9 trillion. Indonesia clears $5.4 trillion and Brazil $5.2 trillion. Turkey is at $4.0 trillion, Mexico $3.6 trillion, Saudi Arabia $2.9 trillion, Egypt $2.6 trillion, Nigeria $2.4 trillion. Nominal dollars still flatter America, and by a wide margin. China's nominal print is about $20.9 trillion against the same $32.4 trillion for the United States. Both numbers are true. They answer different questions. Nominal tells you who can buy foreign assets. PPP tells you how much physical and administrative activity there is to automate. For an adoption thesis, the second number is the one that matters.

Ray Dalio has been describing the political consequence in plain terms. He calls it a tribute system. A hierarchical order in which leaders travel to Beijing to acknowledge relative power in exchange for access and stability. He ties it to a growing view abroad that American security guarantees will not be honored under stress. I take the framing seriously. I do not treat it as scripture. Ports and rail were the first set of rails. Models will be the next set.

IV. The evidence is already in the download data

This part of the argument is no longer speculative.

Over roughly four years, the American share of model downloads on Hugging Face fell from about sixty percent to the mid teens by late 2025, according to reporting in The Wire China. Hugging Face's own one year review of the DeepSeek moment is blunt on the composition shift. DeepSeek R1 became the most liked model on the platform in its history. The top of that list is no longer majority American. Baidu went from zero public Hugging Face releases in 2024 to more than one hundred in 2025. ByteDance and Tencent raised their release counts eight to nine fold. Of newly created models under a year old, downloads for Chinese models surpassed any other country, including the United States. Western startups and researchers now routinely fine tune Chinese base models because those are the largest open weights available.

The Wire China's Southeast Asia reporting puts the commercial logic in local language. A Jakarta lab head said developers will always pick the cheapest one. A Malaysian founder said he wants the biggest model and there is no Western open source offering at that size. Chinese cloud providers were running thirty seven availability zones across six Southeast Asian regions against thirty across four for the Western field.

None of this shows up cleanly in a frontier benchmark table. All of it shows up in switching costs three years from now.

V. The institutional layer

Beijing is not leaving the volume layer to price alone. In July 2026 it stood up the World Artificial Intelligence Cooperation Organization in Shanghai, with twenty nine founding members. Public reporting names Russia, Kazakhstan, Pakistan, Indonesia, Brazil, and a broader set spanning Africa and Latin America among the signatories. The five year commitments attached to the body, as reported by Caixin and The Diplomat, are unglamorous and therefore serious. Training placements. Joint application centers with regional blocs. A weather early warning system deployed into dozens of countries.

Read that list as an underwriter. Training placements create the administrators who will write the next procurement. Application centers create the reference deployments. Weather systems create dependency inside a ministry that cannot afford an outage. Standards get set that way. Not with a better model. With a bureaucracy that has already learned one.

VI. America is running the right play against the wrong clock

Washington understands the problem. Executive Order 14320, signed July 23, 2025, created the American AI Exports Program to push full stack packages abroad. Chips, models, applications, cybersecurity, cloud, and data centers sold together. Analysis from the Institute for Progress argues the contested emerging markets that should sit at the center of that effort include Brazil, Egypt, Indonesia, Nigeria, Thailand, the Philippines, Malaysia, Vietnam, and Bangladesh. That is the correct map. It is essentially the map in this piece.

The tension is that the same government running an export promotion program is running an export control program, and the second one moves faster than the first. The UAE's status was upgraded only in July 2026, and even then chip access was scoped to approved entities. Meanwhile Huawei has been shopping Ascend parts into the UAE, Saudi Arabia, and Thailand, and courting Egypt directly. Beijing has published a self sufficiency ambition on a near term horizon and is moving to expand domestic AI chip output.

Set aside whether the controls are correct on the merits. Underwrite the second order effect. Capability still flows outward through commercial relationships and distillation. American open efforts start constrained at home. The result is a one way street into the volume layer of the world economy, at exactly the moment when the volume layer is where the standard gets set.

Western discourse is spending its attention elsewhere. Alignment theater. Synthetic media. White collar displacement in rich cities. Those are real problems. They are also rich country problems. The quieter failure is dependency. Once an emerging state's logistics, credit, schools, and revenue collection run on foreign models, switching stops being a procurement decision. It becomes a sovereignty decision. Sovereignty decisions do not get made on price.

VII. The map I would force into any serious strategy memo

When we screen a country the way we screen a company, we are not asking which model it admires. We are asking what it has already installed, who financed the installation, and what it would cost to rip out.

Asia. India, Indonesia, Vietnam, Malaysia, Thailand, the Philippines, Bangladesh, Pakistan, Kazakhstan, Cambodia, Laos, Sri Lanka.

Middle East and Gulf. Saudi Arabia, the UAE, Egypt, Turkey, Iran.

Africa. Nigeria, Ethiopia, Kenya, South Africa, Angola, Ghana.

Latin America. Brazil, Mexico, Argentina, Chile, Colombia.

These are not equivalent cases. India can build its own. The Gulf can simply buy, and is buying from both sides. Vietnam and Indonesia industrialize and will take whatever shortens the industrialization. Nigeria and Ethiopia need administration and power far more than they need chat interfaces. Brazil and Mexico live between Western finance and Chinese trade and will hedge accordingly. Pakistan and Kazakhstan sit on corridors Beijing already financed once.

The common variable is growth urgency. Growth urgency selects the stack that shows up, and it selects it quickly.

VIII. The throat

Compute is the oil of this cycle, and the supply chain has a throat. Counterpoint Research put TSMC at seventy three percent of the pure play foundry market in the second quarter of 2026. Its position at the leading nodes is more concentrated than that headline suggests.

You do not need an invasion scenario to price the leverage. You need governments that come to believe only one counterpart can reliably keep the chips, the cloud, the handsets, and the financing flowing. That belief is cheaper to create than a fab and harder to reverse than a tariff.

IX. Two futures

In the first, America wins the cathedral. Benchmarks stay American. Safety papers multiply. Closed models remain impressive and expensive. Emerging economies still buy the stack attached to Chinese devices, Chinese capital, and turnkey Chinese infrastructure. Global token volume follows global GDP, which is to say it follows the parish. The United States keeps the prestige and loses the installed base.

In the second, America treats emerging GDP as the actual battlefield. Competitive open weights exist and are hostable by states that want an alternative to Beijing without becoming a tenant of a single American lab. Energy, chips, and cloud are treated as national goods rather than as line items. The public companies that can genuinely deploy AI into durable operations are valued above the ones that can only demonstrate it.

Markets are priced closer to the first future than the evidence supports. That gap is the part I care about.

X. This is the same thesis, widened

In Pilot Purgatory I argued that AI works and capital is available, and that the binding constraint is organizational. Companies cannot absorb what they have bought. Forty two S&P 500 companies captured 312 percent of the index's price return since ChatGPT while the other 458 captured 38 percent. Fifty eight percent of small and mid cap companies claim an AI strategy and under one percent describe implementation as mature.

That was a governance problem inside public companies. Widen the aperture by one order of magnitude and it is the same problem at the level of the state. Intelligence is being manufactured at declining cost. Absorption is the bottleneck. When Sargasso underwrites a company, the question is whether the organization can metabolize the technology it has already purchased. Run that question at the level of a country with weak administrative capacity and urgent growth targets, and the answer is worse. That is precisely why the party that clears the bottleneck earns something more durable than a product cycle. It writes the rails under the next order.

XI. What I would underwrite

If you underwrite AI as a feature race between rich country labs, you will be right about the models and wrong about the century.

Underwrite instead who owns the rails that India, Indonesia, Brazil, Mexico, Saudi Arabia, the UAE, Vietnam, Nigeria, Egypt, and Turkey will actually run. Underwrite who captures adoption where governance is thin and growth is urgent. Underwrite the closed labs and the national champions as though their real competitor is not the next chat interface, but a hierarchy that intends to make itself impossible to leave.

The AI race that matters is not who builds the smartest model in the richest city. It is who becomes the operating system for the economies that still have the most growth left in them.

This is not a recommendation. It is my map.

Sargasso Capital Management is a constructivist investment firm. This post is research and commentary. It is not an offer to sell or a solicitation of an offer to buy any security or interest in any fund.

Sources

1. Fortune, "Peter Thiel is delivering 4 private sold-out lectures at a club in San Francisco, about the Antichrist," September 2, 2025. Link; Reason, "I listened to over 7 hours of Peter Thiel's leaked Antichrist lectures," October 14, 2025. Link
2. Visual Capitalist, "The World's Largest Economies in 2026, Nominal vs. PPP," using IMF World Economic Outlook projections. Link; IMF DataMapper, GDP based on PPP. Link
3. Fortune, "Ray Dalio says China's ascent ushers in era of 'tribute system,'" May 16, 2026. Link; Fortune, "Ray Dalio just finished a 10-day trip to China," June 24, 2026. Link
4. The Wire China, "Surrounding American AI from the South," June 21, 2026. Link
5. Hugging Face, "One Year Since the 'DeepSeek Moment,'" January 20, 2026. Link
6. Reuters, "Twenty-nine countries sign agreement to establish global AI cooperation body," July 16, 2026. Link; Caixin Global, "China Launches Shanghai-Based AI Governance Body With 29 Founding Nations," July 17, 2026. Link; The Diplomat, "With New AI Governance Organization, China Seeks to Formalize Its Global AI Influence," July 2026. Link
7. Executive Order 14320, "Promoting the Export of the American AI Technology Stack," July 23, 2025. Link; Institute for Progress, "America's AI Exports Program." Link
8. Morgan Lewis, "BIS Upgrades UAE Export Control Status, with AI Chip Access Limited to Approved Entities," July 2026. Link
9. South China Morning Post, "Huawei eyes export of AI chips to Middle East, Southeast Asia to rival Nvidia," July 12, 2025. Link
10. Bloomberg via Free Malaysia Today, "Huawei pitches AI chips to Egypt in test of US tech diplomacy," August 26, 2026. Link
11. RCR Wireless, "China aims to triple AI chip output," August 28, 2025. Link
12. Counterpoint Research, Global Pure Foundry Market Share, Q2 2026. Link
13. Sargasso Capital Management, Pilot Purgatory, May 6, 2026. Link

Tyler Durden Sat, 09/05/2026 - 14:00

Foldable iPhone Production Reportedly Limited Ahead Of Launch

Apple is expected to unveil its first, long-awaited foldable iPhone next Wednesday at its product event in Cupertino, California. Rumored to be called the iPhone Ultra, the device could start at more than $2,000, with MacRumors estimating that the new iPhone could cost as much as $2,499.

Apple analyst Ming-Chi Kuo expects the company to introduce the foldable alongside the iPhone 18 Pro lineup, although Nikkei Asia reports that manufacturing constraints could delay preorders.

Sources deep within Apple's supply chain told the Japanese outlet that production lines for the foldable iPhone are producing only a few hundred units per day as the company works to meet its extremely high quality-control standards.

"Apple has very high quality requirements and added an extra trial run in August ahead of actual production. However, production is ramping up slowly, with output currently at only a few hundred units a day in late August. That initial volume could be challenging to meet market demand," one supply-chain manager told the outlet.

The simple production math is absolutely brutal. Apple has reportedly targeted production of between 8 million and 10 million foldable iPhones this year. Even at 500 units per day, the current production rate would yield fewer than 200,000 phones over the course of a year.

The iPhone Ultra is now said to feature MagSafe charging after all.

Previous leaks suggested Apple was skipping this feature on their first foldable due to space constraints. pic.twitter.com/95EomHTV9c

— AppleTrack (@appltrack) September 2, 2026

Separately, Kuo expects manufacturing constraints to delay preorders until the fourth quarter. That would mirror the 2017 rollout of the iPhone X, which was unveiled in September but did not become available for preorder until late October.

Next week's unveiling will be the first major product showcase under CEO John Ternus, the longtime hardware chief who succeeded Tim Cook last Tuesday. Cook has moved into the executive chairman role after leading Apple for 15 years.

Late this week, Brandon Nispel, an equity research analyst at KeyBanc Capital Markets, published a note to clients outlining what to expect at next week's launch event:

We think Apple's Sept. 9 iPhone launch event is likely a negative catalyst for shares where we likely learn the main unknown, iPhone pricing, neither of which we think hold positive implications. We think either: 1) a larger price increase can soften gross margin pressure, but likely will impact unit volumes and bring "sticker shock"; or 2) prices are raised more selectively, amplifying the focus on gross margins, and a possible need to raise prices again in the future; we don't think either is a great outcome. Apple's Sept. event is typically followed by modest negative reaction to shares.

What do we expect to be announced?

We expect 3 new iPhones: iPhone 18 Pro, iPhone 18 Pro Max, and the iPhone Fold/Ultra.

iPhone 18 Pro

The iPhone 18 Pro is expected to maintain the same 6.3 inch display as the iPhone 17 Pro, while moving to an A20 Pro processor, vs. the A19 Pro chip in the 17 Pro. The A20 Pro should provide better performance and power efficiency when compared to the iPhone 17 Pro, while Apple's C2 modem is expected to improve battery life when using cellular data and improve performance in congested coverage areas. The smartphone is also set to be equipped with an upgraded variable aperture camera allowing users to adjust the amount of light passes through the camera lens. Additionally, the iPhone will have a 4,288mAh battery vs. 4,252mAh in the iPhone 17 Pro.

iPhone 18 Pro Max

The iPhone 18 Pro Max is expected to maintain the same 6.9 inch display as the 17 Pro Max, similarly moving to the A20 Pro processor, and includes a 5,567mAh battery compared to the 5,088mAh battery in the 17 Pro Max, which may increase the thickness of the iPhone. The Pro Max is also expected to include the new variable aperture camera.

iPhone Fold/Ultra

Apple is expected to release its first ever foldable iPhone, which is expected to have a 5.5 inch display when closed and a 7.8 inch display when opened. The Ultra may include the A20 Pro processor, C2 modem, a titanium frame, and the Company will bring back Touch ID on the side of the device rather than having Face ID. It is anticipated to be Apple's thinnest iPhone yet at ~4.5mm, coming in roughly 1mm thinner than the iPhone Air, which was launched at last year's event. However, the phone is expected to come with a camera downgrade compared to the other models, with two rear cameras and no telephoto lens. The Fold/Ultra is also rumored to include two batteries, which could make it the largest battery capacity in an iPhone.

We expect 2 new Apple Watches: Apple Watch Series 12 and Watch Ultra 4.

We expect new AirPods.

We expect timing of iOS 27 launch timing to be solidified.

What's the typical reaction to the event?

We believe given Apple is one of the world's most well reported on companies, announcements at the event rarely are surprising to investors and it doesn't pay to be bullish going into the event. In the past 5 years, Apple's average stock performance the day the iPhone is announced is -0.72%, and T+5 day performance is -1.22%.

What's our view?

At this point, we expect iPhone 18 Pro and Pro Max builds of 73M in F4Q26/F1Q27, which compares to our estimate of 67.7M in the prior year, so on a like-for-like basis, we expect a higher number of iPhone 18 Pro/Pro Max builds vs. the iPhone 17. However, when including the iPhone 18 Fold/Ultra and the iPhone 17 base model, we see total iPhone 18 builds of 80M, vs. ~91M in the prior year, where we see declining unit volumes due to the lack of iPhone 18 base model. We suspect the decline in unit volume of ~12% is made up for with higher pricing due to mix as well as higher unit ASPs. We are factoring in iPhone Pro price increases of $150 to $1,249 and iPhone Pro Max price increases of $200 to $1,399, and assume a $2,199 price for the iPhone Fold/Ultra

Apple shares are up 17.7% year to date as of Friday's close.

The average 12-month price target among analysts tracked by Bloomberg is $329.91, representing roughly 3% upside from current levels.

Also next week, Chinese smartphone rival Huawei will release the latest generation of its trifold smartphone on Monday, just ahead of Apple's launch event.

Tyler Durden Sat, 09/05/2026 - 13:25

NANO Nuclear Advances KRONOS With Baker Hughes, Adds Enveniam To Fuel Efforts

Three weeks after we noted that NANO Nuclear Energy's vertical-integration strategy was beginning to look more like a physical fuel cycle than a corporate slide deck, the company has delivered a pair of updates spanning both ends of the nuclear value chain.

NANO’s announcement from Thursday details ongoing progress for the design of a circulation pump for cooling their KRONOS reactor, and Friday's announcement describes the multi-prong agreement with a new engineering firm for developing their nuclear fuels business segment.

$NNE NANO Nuclear and Howden, a Baker Hughes Business, Advance Engineering Collaboration for the KRONOS MMR™ Primary Helium Circulator to Detailed Design Phasehttps://t.co/ueOKR7DcOp

— NANO Nuclear Energy (NASDAQ: NNE) (@nano_nuclear) September 3, 2026

Development of the primary helium circulator was moved from preliminary engineering to detailed design. Howden, a Baker Hughes subsidiary following the acquisition of Chart Industries, is “building upon the reactor performance requirements established by NANO Nuclear.”

The helium circulator is one of the most critical components of high-temperature gas-cooled reactors like NANO's KRONOS design. It moves helium coolant through the reactor to transfer heat from the core and out to the secondary system.

Howden has established a “mature technical foundation” which allows for further optimization in manufacturing planning.

Jay Yu, Founder and Chairman of NANO Nuclear Energy, noted:

"each engineering milestone strengthens the industrial ecosystem supporting KRONOS while further positioning the program for future first-of-a-kind deployment and long-term commercial success."

The day after announcing progress with the circulator, NANO released a statement detailing a new agreement with Enveniam.

The MOU establishes a collaboration between the two companies addressing a wide range of operations across the nuclear value chain. The press release points to six principle workstreams under the combined effort:

• Nuclear fuel transportation
• Conversion and deconversion
• Microreactor commercialization
• Advanced manufacturing
• Domestic fuel supply chain
• Commercial energy markets

James Walker, Chief Executive Officer of NANO Nuclear Energy, highlights:

"Enveniam's capabilities closely align with our expertise and business plans across these critical workflows. We believe this collaboration can help us evaluate projects more efficiently, identify execution risks earlier and build stronger delivery plans as opportunities advance toward definitive agreements."

Most notably, this new work between NANO and Enveniam follows the announcement last year that Enveniam will be serving as Lead Project Integrator for LIS Technologies.

There, Enveniam will lead “the design, development, and construction of the LIST laser-based uranium enrichment facility.”

LIS Technologies and NANO Nuclear are working together to develop a vertically integrated fuel chain, with LIS fulfilling the enrichment stage. NANO is working on multiple other stages of the fuel chain, to include conversion and deconversion, fuel fabrication, and fuel transportation.

Tyler Durden Sat, 09/05/2026 - 12:15

Biden-Appointed Judge Dismisses DOJ Lawsuit Against New Jersey Law Restricting ICE Operations

Authored by Troy Myers via The Epoch Times,

A district judge ruled on Friday that New Jersey can continue restricting federal immigration officers from using state property for immigration enforcement-related purposes.

New Jersey Gov. Mikie Sherrill is shown in this file photo. Eduardo Munoz Alvarez/Getty Images

The Department of Justice (DOJ) had accused New Jersey in a lawsuit of violating the Supremacy Clause of the U.S. Constitution, also known as preemption, which holds that federal law supersedes state law when the two are in conflict.

The agency alleged that an executive order New Jersey Gov. Mikie Sherrill signed earlier this year blocked federal immigration operations from using state property, preventing Immigration and Customs Enforcement (ICE) from carrying out its duties.

Biden-appointed Judge Georgette Castner of the U.S. District Court for the District of New Jersey disagreed.

"[The executive order] does not prevent the United States from carrying out federal immigration laws; rather, it declares that New Jersey will not provide its own resources to assist the United States in these efforts," said Castner.

The judge also dismissed DOJ lawyers' argument that adhering to federal immigration law, the Immigration and Nationality Act, specifically, was "impossible" because of the state restriction and prevented "the United States from accessing aliens."

"The Court finds this response unconvincing," Castner wrote. "The Court also finds no conflict preemption."

The Justice Department did not respond to a request for comment by publication time.

Under Sherrill's executive order, federal immigration officers are prohibited from using state property as a staging area, processing location for illegal immigrants, or operations base for carrying out enforcement.

The law also prevents any New Jersey executive branch departments or agencies from allowing federal authorities to use state property.

Sherrill included an exception in her order that allows access if authorized by a judicial warrant or order.

The governor welcomed Castner's decision in a Friday statement, criticizing federal immigration agents as "untrained."

"ICE is not making New Jersey's communities any safer," she said in a statement.

"My number one priority will always be to protect New Jerseyans, and I will continue to fight for safe communities for everyone in our state."

Although Castner conceded in her 30-page opinion that the federal government has an obligation to remove illegal immigrants from the United States, she wrote that "nothing in the [Immigration and Nationality Act] indicates that states are required to assist the federal government in meeting this obligation."

After the signing ceremony of her executive order earlier this year, Sherrill announced a website launch for New Jersey residents to report their interactions with ICE and upload photos and videos of officers.

Information submitted to the portal would be used by the state attorney general's office to potentially "hold the government accountable."

New Jersey has also adopted a mask ban on federal law enforcement officers and a requirement for them to show identification before making an arrest. The DOJ sued over that law as well.

The Garden State, and a few others, had already banned its local and state law enforcement agencies from cooperating with ICE, otherwise known as 287(g) agreements, prior to President Donald Trump's return to the White House last year.

Several more Democratic-led states have followed in outlawing such cooperation or attempting to do so since Trump, a Republican, began his second term and made it a priority to stop illegal immigration.

Tyler Durden Sat, 09/05/2026 - 11:40

AI Bears: Right About The Excess, May Be Wrong On The Trade

Authored by Lance Roberts via RealInvestmentAdvice.com,

While the AI bears focus on concentration and circular financing, the last tech overbuild was financed with debt, and this one is being paid for in cash.

Before I discuss why I disagree with the “AI bears,” I want to state that I respect their opinions, have evaluated their concerns, and have simply derived a different set of conclusions. That is an important statement, because this particular group of “AI bears” includes some of the sharpest risk minds in the business, and they have been early to almost every warning that later mattered.

When people this good line up on one side of a trade, you go back and check your own work. That’s what I did, and this article is where I landed. As always, the reason I publish these articles is for accountability later, for you and our clients.

While this group of AI bears may indeed be right about the excess, they could still be potentially wrong about the trade. I care about the latter, and those are two different claims that the market keeps confusing.

The Bear Case Deserves A Hearing

Let’s start with the person I admire the most in the AI bear camp: Fred Hickey. Fred has run The High-Tech Strategist since 1987 and has made the cleanest version of the argument. He compares today’s datacenter mania to the fiber-optic overbuild that cracked in 2000, only far larger. To wit: he has called it a “more dire situation than the great fiber-optic capacity overbuilds.” 

He is not alone in this view, and that really is the point to address. Michael Burry has been circling the same plumbing, watching Nvidia’s credit-default swaps widen as the chipmaker turns into banker, landlord, and equity partner to its own customers.

But the AI bear roster doesn’t stop there. The Bank for International Settlements flagged roughly $1.65 trillion in off-balance-sheet obligations held by the largest hyperscalers, exceeding the amounts they carry on their books. Then Sequoia’s David Cahn put the annual gap between AI infrastructure spending and ecosystem revenue at nearly $600 billion. Furthermore, Allianz measured the capex-to-revenue divergence at about 46%, well past the 32% that marked the 2001 telecom bust. Then, lastly, in August, an MIT study suggested that most corporate AI pilots had produced no measurable revenue at all.

That is a very serious AI bear group making a very serious case, and you should only ignore it at your peril. When a strategist who has correctly traded five separate Nvidia collapses of 55% or more says a sixth is coming, and a Bank of America survey shows 54% of professional managers are now calling AI a “bubble,” you need to factor that into your thinking. As investors, we must work out precisely which parts are right and which parts are borrowed pattern-matching from a different era.

So, let’s start with where the AI bears are right.

Where The Bears Are Right

Yes, valuations are stretched, and by the measure that matters most for fragility, concentration is worse now than it was in 2000.

Notice how far the line has traveled in the chart above. The ten largest stocks now make up roughly 43% of the S&P 500, a record, and past the 27% peak the index touched at the height of the dot-com boom. By that single measure, the market is more top-heavy today than at any point in modern history. The equal-weight index has already begun to diverge from the headline benchmark, which is exactly the kind of internal crack that tends to show up before the megacaps wobble. Such is the setup the AI bears keep pointing toward, and on that point, they are correct.

Secondly, the circular-financing argument is real, too. When Nvidia takes an equity stake in a company that then commits to buying Nvidia chips, part of what gets reported as “demand” is the seller funding its own sales. Such is a genuine distortion of the signal, and it deserves the scrutiny that it has been getting. Add the depreciation math, where trailing capex of roughly $434 billion dwarfs the $149 billion of depreciation currently running through income statements, and you get a bill that arrives in 2027 through 2029, whether the revenue does or not. The AI bears did not invent any of this; they just read the corporate filings.

Where The Analogy Breaks

So, with all that stated, it seems to be obvious that you should just get out of the AI trade now before the next “Dot.com” crash occurs. Here’s the problem with that comparison. The comparison to the fiber-optic “boom and crash” is that it turns on the one variable that actually determined the outcome in 2000, and that variable does not read the same today: who is writing the checks.

Leading up to the 2000 overbuild, the financing came from companies that had no business borrowing what they borrowed. WorldCom, Global Crossing, and the upstart carriers that were stringing fiber on debt, and the vendor loans that Lucent and Nortel handed customers who could not pay them back. When revenue failed to arrive on schedule, those balance sheets could not cover the shortfall, and the structure collapsed into bankruptcy court.

Today’s buildout is a different animal on this exact axis. Roughly two-thirds of the 2026 capex is funded directly from the operating cash flow and equity of Microsoft, Alphabet, Amazon, and Meta, four of the most profitable enterprises ever assembled. The existing borrowing is investment-grade and still a minority of spending. The balance sheets carrying this cycle are not WorldCom’s, and that difference is close to the whole ballgame.

Revenue Is Real

Second, “no revenue” is not the same thing as revenue that simply hasn’t caught up to the spending yet. Inference now clears roughly 70% gross margins. Microsoft’s AI business is past a $37 billion run rate, Amazon’s AI revenue is growing in the triple digits, and Anthropic went from about $9 billion to a reported $47 billion run rate in a single year.

More notably, even Nvidia, the bears’ favorite “whipping boy,” has seen forward earnings climb so rapidly that its multiple has actually compressed as fundamentals caught up to what was believed to be overly exuberant expectations. That is the mirror image of Cisco in 2000, which peaked at nearly 30 times sales on earnings that then evaporated. The revenue trailing capex is a timing issue, not the zero-payback story the headlines imply.

Third, the AI bears predict a glut, yet the binding constraint right now is the opposite of a glut. Microsoft is sitting on something like $80 billion of Azure orders it cannot fill for lack of electricity, with GPUs idle in inventory waiting on power.

Today, more than 60% of the data center capacity planned for 2027 is not yet under construction. If or when datacenter demand is rationed by the power grid rather than by customers walking away, you do not have a capacity glut; you have a shortage. However, a fair objection at this point, and it is the strongest one the bears have: build two or three years’ worth of power and transmission, and today’s shortage becomes tomorrow’s oversupply. That is true concern, and it is the timeline risk worth watching closely, but it is also a 2028 question, not a 2026 one.

What The AI Bears Debate Means For Investors

Let me be clear. The AI bears have a real case, but no timing. This is the same problem we noted in “Debt Trap: A Crisis Without A Calendar.” I am definitely not arguing that investors should be buying the AI complex with both hands and closing their eyes. The question is NOT whether there is excess, because there plainly is. The real question is what a disciplined investor does with a genuine, extreme, but cash-funded overbuild.

Start with position sizing, because it is the one tactic that survives contact with a drawdown. NVIDIA has fallen by 55% or more on five separate occasions since 2000, and it has recovered to new highs after each. Investors who were sized to hold through the pain benefited tremendously. They did even better if they managed their exposure risk during those drawdowns.  Own your AI exposure at a weight where a 50 percent drawdown is uncomfortable rather than fatal. Sizing comes first.

Secondly, the rules are simple.

• Favor the self-funders over the borrowers, and
• Spread your exposure across the layers of the trade, the chips and the clouds, and the power underneath them, rather than staking the whole thesis on a single chip name.
• Always insist that the price you pay is backed by existing earnings and not by a total addressable market slide.
• Lastly, keep some dry powder (ie, cash), because the volatility in this complex is a feature rather than a defect, and a real correction turns into a gift the moment you have cash and a shopping list ready.

Where you take the risk matters as much as how much you take. Not all AI exposure carries the same danger, and the map below is how I would sort it.

The 5-Signals

The self-funders and the power bottleneck are part of this trade that looks least like 2000. Conversely, the levered edges are the part that looks most like it. That levered part is where a revenue disappointment does the real damage, and those are the first positions to shed when the story starts to wobble. The profitable compounders funding their own buildout sit in a different bucket, and selling them because a bear called a top is how investors miss years of compounding while waiting on a crash that shows up late, or never.

Which raises the harder question. How do you know when the story is actually wobbling?

This is crucial, and the trap that most investors fall into. You do not need to call the top. What you need is a short list of signals that fire before the top is obvious to everyone, and the discipline to act on the list rather than argue with it.

Which brings me to the question I get most often: “Why not skip the stock-picking and just own the index?”

Here is my opinion. The index has quietly become the “bet.” With the ten largest names accounting for nearly 43% of the S&P 500, buying the market today is a concentrated wager on those same few companies, made passively, without anyone ever deciding it was a good idea. Owning the index is not a way to sidestep the AI trade, because it is the AI trade, whether you meant it that way or not.

Bob Farrell’s Rule #9 is always worth repeating here:

“When all the experts and forecasts agree, something else usually happens.”

Conclusion

With more than half of managers now calling AI a “bubble” and “long the Magnificent 7” ranked the most crowded trade on the Street for nearly two years, the consensus has already tilted bearish. That does not make the AI bear case wrong, but it does suggest the obvious crash may refuse to arrive on the obvious schedule.

One of my favorite quotes from Howard Marks is that, “being too far ahead of your time is indistinguishable from being wrong.” When it comes to investing, timing is critical. Most importantly, notice that Hickey himself holds his AI-bear book at roughly 1% of his portfolio in puts, suggesting he treats it as a hedge rather than a conviction short. That is the posture worth borrowing. Own the compounders, hedge the tail, and let the revenue prove or disprove itself on the tape.

The AI bears will eventually be right about a drawdown, because everyone is eventually right about a drawdown. Whether they are right about the trade depends on a question their favorite analogy cannot answer:

“What happens when the richest companies on earth overbuild with their own money rather than borrowed money?”

Such is the question actually on the table, and that is the question you must answer before you sell.

We publish a variety of perspectives. Nothing written here is to be construed as representing the views of ZeroHedge.

Tyler Durden Sat, 09/05/2026 - 10:30

Ukraine Pushes Congress For Russia Sanctions Before Election Recess

Authored by RFE/RL staff via OilPrice.com,

Ukraine's top sanctions official says he remains optimistic about prospects for a sweeping Russia sanctions bill in the US Congress despite growing uncertainty over when the House of Representatives will take it up, as lawmakers face a sharply shortened legislative calendar ahead of the November elections.

Vladyslav Vlasiuk, Ukrainian President Volodymyr Zelenskyy's sanctions commissioner, spent this week in Washington meeting lawmakers and congressional staff as Kyiv presses Congress to advance the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026.

The legislation passed the Senate on August 7 by an overwhelming 86-11 vote, reflecting rare bipartisan agreement. The bill would give the president additional authority to impose punitive tariffs on countries that continue buying Russian fossil fuels. It also includes provisions targeting Iran, which Vlasiuk said is engaged in close military-industrial cooperation with Moscow.

But the measure faces a more complicated path in the House, where some Democrats have expressed reservations about provisions that would give President Donald Trump additional authority to impose tariffs.

Republican leaders announced on September 3 that the final two weeks of the pre-election House session are canceled, severely curtailing what had been a full legislative calendar for September.

House members are expected to leave Washington no later than September 17 and not return until mid-November. The House will reconvene for one additional week of business after next week's Labor Day break.

The compressed calendar has increased pressure on supporters of the sanctions legislation. Senior Republican aides told RFE/RL that the bill remains a GOP priority, provided Democrats "get their ducks in a row."

Democratic aides, in response to RFE/RL inquiries, expressed cautious optimism about the measure, underscoring uncertainty over whether Speaker Mike Johnson will bring it to the floor.

Vlasiuk: 'Good Chance'

Vlasiuk said he held roughly 20 meetings with lawmakers and congressional staff during his Washington visit, including discussions with members of both parties.

He said the Ukrainian delegation encountered broad support for increasing pressure on Russia and that no lawmaker told him outright that they would oppose the legislation.

"Everyone agreed that it was necessary to increase pressure on Russia," Vlasiuk said at a briefing at the Ukrainian Embassy in Washington. "No one said that he definitely would not support this bill."

He described Ukraine as "quite optimistic" about the level of support for the legislation, including among Democrats.

One potentially important route would be for the House to consider the bill under suspension of the rules, a fast-track procedure generally used for legislation expected to command broad support. Vlasiuk said that was among the realistic scenarios for moving the bill forward.

"I think that there is really good chance that this bill will be brought onto the floor," he said.

Vlasiuk has previously identified the week after next as Kyiv's preferred window for a House vote. With the House calendar now compressed, that period could provide one of the last opportunities for a vote before lawmakers leave Washington.

Asked by RFE/RL whether the momentum surrounding the bill was still there, Vlasiuk pointed to what he characterized as continued bipartisan backing for Ukraine.

"There is a lot of support for Ukraine on the Hill," he said, adding that Kyiv has been "very vocal" in stressing the urgency of passing the bill. "At the same time, well, I mean, let's wait and see," Vlasiuk said.

Democrats Wary Of Trump Powers

The principal obstacle is not broad disagreement over confronting Russia, according to Thomas Melia, a former senior State Department official and Senate Foreign Relations Committee deputy staff director who is currently with the Free Russia Foundation.

In an interview with RFE/RL, Melia explained that Democratic leaders have several reasons for hesitating. One is that the legislation is not strictly necessary for the administration to impose sanctions, he said. Trump already possesses significant authority to sanction Russian individuals and entities.

The bill's principal value, in Melia's assessment, is therefore partly political and symbolic: Its bipartisan backing would demonstrate congressional resolve to increase pressure on Moscow.

But Melia said the House Democratic leadership was not sufficiently involved in negotiating the version that ultimately emerged from the Senate.

That concern is particularly relevant to Representative Gregory Meeks of New York, the senior Democrat on the House Foreign Affairs Committee, who has expressed general support for tougher pressure on Russia but has raised concerns about provisions of the legislation.

There is also a substantive concern: The final version of the legislation gives the president additional tariff authority. Melia said that has created hesitation among Democrats who are wary of giving Trump another instrument that could be used broadly against US trading partners.

Melia also emphasized another change from the bill's earlier form: The final version makes the sanctions optional rather than mandatory.

That distinction matters, he said, because the original legislation's political force came in part from its mandatory sanctions provisions and overwhelming bipartisan support in the Senate.

After the death of Senator Lindsey Graham, the administration backed a version of the legislation but sought changes that made sanctions nonmandatory and added tariff authority, Melia said.

The result, in his view, is a weaker measure than the original. Melia said the final version nevertheless retains substantial political significance because of the broad bipartisan support that surrounded the tougher proposal.

Kyiv Backs Tariffs

Vlasiuk defended the tariff provisions, arguing that they could make sanctions substantially more effective. "This is a powerful instrument which will allow to amplify the effect of the sanctions," he said.

He argued that tariffs and sanctions can have similar economic effects but differ in their ability to be circumvented.

"Sanctions can be adapted, sanctions can be evaded, tariffs cannot be adapted or evaded," Vlasiuk said.

He also rejected concerns that countries could be arbitrarily targeted under the bill, saying the legislation establishes criteria based on purchases of Russian fossil fuels.

In particular, he pointed to China and India, which Ukraine considers central to Russia's continued ability to sell its energy exports.

Vlasiuk said the pressure could represent "a huge blow" to Russia's ability to finance its war against Ukraine.

Ukraine also supports the bill's inclusion of Iran, he said, citing Tehran's close military cooperation with Moscow.

"Everyone understands how close cooperation is between the military-industrial complex of these countries," Vlasiuk said. "Therefore, Iran is very well-deserved."

House Vote Window Narrows

The political stakes are heightened by the House's decision to cancel its final two weeks of pre-election legislative work.

The chamber is expected to depart Washington no later than September 17, although Republican leaders have said members could be recalled if the Senate advances a party-line budget reconciliation package. That scenario is not currently expected.

Representative Don Bacon of Nebraska, a Republican who has supported the sanctions effort, described the lack of congressional action as a serious failure.

"This is a real shame. It passed 86-11 in the Senate," Bacon said. "Congressional inaction on Russia's invasion of Ukraine and on Putin's crimes is a real failure. The history books will not be kind."

For Kyiv, the urgency is not simply legislative.

Vlasiuk warned that Ukraine faces another difficult winter after months of Russian missile and drone attacks. He said 160 people had been killed in missile and drone strikes in recent months.

"We have to increase the pressure over Russia to make them change their plans, to make them really negotiate," he said.

He argued that passing the sanctions bill now would have two effects: It could eventually increase economic pressure on Russia, while immediately sending a political signal to both Ukraine and the Russian government.

There is, he said, an element of inertia in sanctions policy. Even after legislation passes, implementing measures can take days, and producing a significant effect on Russia's economy can take weeks.

"But at the same time, the very fact of passing this sanction bill," Vlasiuk said, would send a "strong signal of support to Ukrainian people" and a "really strong signal to Russian government."

Tyler Durden Sat, 09/05/2026 - 08:10

How Neoliberals Fueled The Rise Of Socialism

Authored by Connor O'Keeffe via Mises Institute,

The rising popularity of politicians on the American left who either explicitly identify as socialist or, at least, don't shy away from or disavow the term appears to be causing genuine concern within the Washington establishment.

That is, of course, entirely justified. Socialism is profoundly unjust and destructive.

These days, the socialists like to present their entire ideology as nothing more than having a bit of empathy for those in need or an interest in seeing everyone "have" access to services like modern healthcare.

Look any deeper, though, or ask some follow-up questions, and the truth will eventually surface. What the socialists actually want is a massive increase in government interventionism that would see nearly every aspect of life politicized and the remaining productive components of the economy hollowed out into a zero-sum lobbying battle to claim some of the diminishing loot of a much larger, more powerful, and tax-happy federal government.

Any step towards socialism needs to be energetically opposed by everyone who cares about the rights and material well-being of everyday Americans.

However, the concern we're seeing from the neoliberal and neoconservative establishment is frustrating. Because the political order that they have built and preserved over the last half century has made the growing popularity of this kind of "democratic socialism" all but inevitable.

Scholars like Gabriel Kolko, Murray Rothbard, and Patrick Newman have written extensively about how the powerful, centralized federal government that we live under today originated in the so-called Progressive Era in the late 1800s and early 1900s. And, importantly, it was not grassroots reformers who spurred the growth of the federal government at the time, but well-connected business interests.

The narrative many of us were taught in school of government officials reluctantly giving themselves more power over the economy at the turn of the century to placate a public demanding an end to laissez-faire capitalism is merely a convenient creation myth to justify what has always been a scheme to use state power to redistribute wealth from the broader public to a small caste of well-connected families and firms.

As nearly all of human history makes clear, these sorts of crony, state-empowered redistributive schemes tend to be rather unstable.

That's in part because people typically aren't all that pleased when it starts to become clear that the government is transferring some of their wealth to people that are already far wealthier - requiring the opinion molders of the political class to frequently scramble to find some new way to excuse the policies making up the racket.

But also, the government doing things like warping credit markets to benefit certain industries or launching unnecessary wars to enrich weapons companies and empower foreign leaders who are good at lobbying has plunged the country into several economic and geopolitical crises.

So far, the American political class has done a remarkable job using these crises to greatly expand and accelerate their self-enriching redistributive rackets. But every crisis is unique. Different situations have required different responses.

Which brings us to the rise of what's often called the neoliberal "Washington consensus."

The political establishment's well-known embrace of neoliberalism in the 1980s was primarily a response to the events of the 1970s. For much of that decade, the country was forced to endure a prolonged period of high price inflation that was caused by the Federal Reserve's extensive money printing in the 60s and early 70s to help finance the Vietnam War and Johnson's Great Society programs. That economic chaos was then intensified by the collapse of the Bretton Woods system, the OPEC oil shocks, and Nixon's wage and price controls.

As we've seen in the past few years, inflation alone is more than enough to create strong public demand for political change. But in the 70s, previous credit expansion combined with the government's persistent unwillingness to allow the economy to correct itself also resulted in a stagnant economy. And that combination of high inflation and stagnant economic growth, or "stagflation" as it's come to be known, was considered economically impossible by Keynesian economists.

So the high inflation, low economic growth, and real-time collapse of Keynesianism - the school of thought the political class had been using to justify its economic interventionism - meant change was coming. Also, by the mid-to-late 1970s, the so-called New Left movement, which had started as student protests against the Vietnam War in the 60s, had descended into a highly disturbing mix of lethargic drug use and outright terrorism.

Into that vacuum stepped Milton Friedman.

The nerdy, quick-witted, suit-sporting economist was a perfect foil to the radical, convention-flouting far left much of the country was growing tired of. Friedman's ability to quickly, thoroughly, and politely eviscerate left-wing economic arguments in a highly entertaining fashion made him a star on the talk shows of the day. And, unlike the Keynesians, Friedman's monetarism seemed vindicated by the stagflation.

Thanks in large part to Friedman, the neoliberals took hold of the culture enough to prompt the left-leaning Carter administration to deregulate many parts of the economy including the railroad, airline and trucking industries.

And then, of course, came Ronald Reagan.

Together with Friedman and his fellow Chicago School economists and foreign leaders like Margaret Thatcher, Ronald Reagan and his political successors supposedly rolled back all the reforms made since the Progressive Era, ushering in an age of "market fundamentalism," or unfettered capitalism. They helped bring about the modern "Washington consensus" that the government ought not meddle in the economy at all, which we're told is only just now - four decades later - starting to face some pressure from figures like Bernie Sanders and Donald Trump.

At least, that is the narrative that both neoliberals and their opponents have settled on. But it is a lie.

The rise of neoliberalism in the 70s and 80s was, to be sure, a real ideological shift. The Friedmanites did come to dominate the economics discipline and political culture in very much the same way Keynesians had decades before.

However, the actual implementation of those free-market ideas was nowhere even close to what the establishment's narrative would have us believe.

Virtually all the deregulation that occurred during the Reagan presidency had actually been passed during the Carter administration. It was only because the changes were phased in during the Reagan administration that made it seem like the new president was deregulating the economy. In fact, he was doing no such thing.

The same goes for tax cuts. As Murray Rothbard explained, the much-heralded Reagan tax cuts that were passed in 1981 were more than offset by tax increases that same year. The administration then spent years raising taxes even more in the name of "closing loopholes."

And all of that was necessary to help fund the massive increase in government spending that took place throughout the Reagan years. The so-called Reagan revolution was truly, to paraphrase Rothbard, an acceleration of statist intervention, rolled out under the cover of free-market rhetoric.

There was, however, one area where the Friedmanites did see their policy prescriptions implemented in a genuine and lasting way: monetary policy.

Unfortunately, when it comes to monetary policy, the Friedmanites entirely abandon their support for markets and instead advocate for government central planning. These new establishment-approved neoliberal economists believed - not only in a fiat monetary system controlled entirely by a government central bank - but in a highly active, inflationist central bank.

Friedman himself even wrote a famous book with Anna Schwartz that used questionable econometric methods to argue that the Great Depression happened because the Federal Reserve had not been printing enough money.

Unsurprisingly, the political class was a lot more than willing to implement a Friedmanite program that gave them more power over the economy rather than less. And so, it was in the realm of monetary policy that the largest expansions of both state power and the crony rackets it's utilized for took place under the new neoliberal paradigm.

First, the Fed was leaned on to print money to help pay for the hawkish foreign policy of the post-1980 Republican Party. And then, especially under the Chairmanship of the late Alan Greenspan, the central bank began to directly prop up the financial sector.

The evolution of Wall Street from one of many options for investing one's savings to essentially being the nerve center of the entire economy was not the result of some natural change in saver preferences; it was the consequence of government policy. Specifically, Greenspan's Fed helped prop up Wall Street with a steady supply of easy money and cheap credit to artificially boost the sector, paired with extensive bailouts for these firms whenever the good times ran out.

This was, in effect, a major escalation of the kinds of crony rackets the federal government had been carrying out since the Progressive Era - all justified by Friedman's monetarist apologia for government money printing.

And that gets to the core of it. The Friedmanite, Reagan-led neoliberal revolution did not end economic interventionism, it rebranded it. And the financialized economy was that new brand. Getting rich on Wall Street became the epitome of capitalism. The rising stock market was the new metric for economic strength. And the Fed's money printing became the economy's lifeblood.

In the decades since, that Fed-enabled racket has expanded dramatically and has seeped far beyond the financial sector. It has allowed the political class to supercharge the rackets built up over the last century - which, remember, the neoliberals never did away with - transferring far more of our wealth to that small caste of well-connected cronies.

And yet, thanks in large part to the neoliberals of the past and present, this highly-interventionist system where the government is actively warping the market to benefit those already on top is called - and truly considered by many to be - genuine, free-market capitalism.

That isn't true. It's a trick - a trick meant to mislead us so that whenever a new economic crisis strikes, we reflexively conclude the crisis happened only because the government isn't involved enough in the economy. And that is the mindset that has made so many normal, everyday, non-ideological people open to the arguments of these self-described democratic socialists.

The neoliberal and neoconservative establishment has done much to carry out this trick. They shouldn't be surprised that it's working.

We publish a variety of perspectives. Nothing written here is to be construed as representing the views of ZeroHedge.

Tyler Durden Fri, 09/04/2026 - 21:45

Pimco's Top-Performing 60/40 Fund Bets AI's Next Winners Are In Asia, From Chips To Rare Earths

Emmanuel Sharef, who oversees Pacific Investment Management Co.'s flagship Balanced Income and Growth Fund, spoke with Bloomberg about how the next leg of the artificial-intelligence boom could be concentrated in Asian stocks and beyond. 

Wealthy clients in Taiwan, Hong Kong, Singapore, and mainland China have been piling into the $19 billion fund, which has outperformed 97% of its peers during the past three years.

The fund is underweight most hyperscalers and members of the Magnificent Seven as soaring AI capital expenditures increase debt loads, pressure free cash flow, spark credit concerns, and make already eye-popping valuations much harder to justify. 

"We're underweight the majority of hyperscalers at the moment and we're underweight the majority of the Mag seven just given their high valuations," Sharef told the outlet earlier this week.

He continued, "You don't necessarily need to own the most expensive stocks to capture a particular theme or a particular market trend."

The 60/40 Balanced Income and Growth Fund has been moving further down the supply chain toward companies that build data center components and has become overweight in Asia, where it sees stronger earnings growth, cheaper valuations, and greater exposure to the companies that should be viewed as the building blocks of a data center.

That infrastructure includes semiconductor components, cooling systems, cable interconnects, optical equipment, power supplies, construction machinery, and industrial metals.

"The AI capex build-out is enormous," he said. "It would imply significant demand for semiconductor components for chips, cooling equipment, cable interconnects, optical equipment, power supplies, construction equipment, metals, all of the things that go into building a data center."

The fund's 60% stock allocation gained exposure to AI last year by plowing billions of dollars into firms such as Samsung Electronics, SK Hynix, and Taiwan Semiconductor Manufacturing.

Sharef also highlighted a theme we've been developing: the importance of exposure to mining and materials companies tied to data-center construction and global rare-earth supply chains.

"Chinese resource extraction and materials companies are quite significant, not just for the data center buildup, but also for rare earths," he added.

Sharef's call to gain exposure to rare earths and critical materials reinforces a theme we have been developing: the AI trade is ultimately constrained by access to the physical inputs required to build chips, data centers, and power infrastructure. Rare earths and other critical materials are becoming a crucial component of the next AI trade as Chinese suppliers restrict some shipments to the US and US companies accelerate efforts to secure alternative sources beyond Beijing's reach. 

The takeaway from Sharef's conversation with Bloomberg is that the next AI winners will be on an ex-US basis, mostly in Asia. 

Tyler Durden Fri, 09/04/2026 - 21:20

AI Tax Increases Are Like The Tractor Tax Proposals Of Old

Authored by Bruce Thompson via RealClearMarkets,

President Ronald Reagan famously described Washington politicians' solutions to every problem as "if it moves, tax it." That is exactly what many in Washington today want to do with artificial intelligence.

As Wall Street Journal chief economic commentator Greg IP wrote recently, a growing number of experts believe there is "a simple answer to AI job losses." Tax it. His column described a petition signed by 1,000 economists, including 17 Nobel laureates, pleading for higher taxes on AI to prevent "large scale" job losses.

Reagan knew what he was talking about. He grew up in the Midwest in a small town surrounded by farms, and he surely remembered a time when politicians wanted to tax tractors, a new technology driving change. In the early 1900s, the tractor was revolutionizing farming, and politicians were pushing proposals to tax the tractor and prevent the loss of farm jobs. Rep. Willian Connery, a Massachusetts Democrat and Chairman of the House Labor Committee, was a leading advocate of taxing tractors and other labor-saving machines to stop mass unemployment.

The introduction of tractors was the most revolutionary change in our history, affecting millions of jobs and driving millions off the farm. Between 1910 and 1960, nearly 10 million farm workers lost their jobs and 25 million people left their farms for the city. The benefits of the tractor were enormous. Farm production soared, food prices dropped, and the U.S. provided enough food to feed people around the world.

The farm revolution transformed the American economy, creating growth, and increasing prosperity. Millions of farm workers were freed from back-breaking labor and found better jobs in the city. An NBER study called tractors the "engine of growth" and estimated they doubled per-capita GDP and created millions of jobs.

AI promises a bright future of technological and scientific progress, increased productivity, and a more prosperous economy. Like many changes in the past, there are concerns about the impact on jobs. But taxing AI would be just like taxing tractors, a futile knee jerk reaction to change.

Not surprisingly, there is no shortage of terrible tax ideas floating around Washington. Senator Bernie Sanders has proposed a 50% tax on the equity of AI companies. Senators Elizabeth Warren and Ron Wyden have proposed new taxes on data centers. House Democrats have proposed a new tax on AI computing powers, and others have proposed a tax on robots. If it moves, they want to tax it.

None of these tax increases are a good idea. Raising taxes on AI would slow investment, curb innovation, and only help our foreign competitors. Just like a tractor tax, a new AI tax would only slow new technological advances that will benefit everyone.

Rather than taxing AI, Washington should focus on assisting those jobs which have been most affected by automation, such as entry-level jobs. Congress should consider targeted tax incentives for entry-level employment, including payroll tax relief and job training for junior workers. Helping young workers get started is a much better response to the AI revolution than trying to stop it with a tax increase.

Bruce Thompson was a U.S. Senate aide, assistant secretary of Treasury for legislative affairs, and the director of government relations for Merrill Lynch for 22 years.

Tyler Durden Fri, 09/04/2026 - 20:55

Online Betting Adoption Goes Parabolic: First-Timers Triple, Gen Z Overtakes Millennials, And Football Season Hasn't Even Begun

Online betting is off to the races - and this summer the adoption curve started looking like a hockey stick.

According to a new analysis by Bank of America - which can see every ACH, debit and credit card payment its customers make to and from sportsbooks, horse-racing platforms and prediction markets their own customers make: 

• Roughly 5% of BofA customers sent money to an online betting platform in July.
• The number of online bettors is up 40% since the start of the year.
• The number of first-time bettors in June and July was more than triple the January level.

The bank credits the summer spike to the World Cup and "promotions and buzz" around prediction markets, and fair enough: every adoption curve has a catalyst. What matters is what the base looks like once the catalyst passes, and here the seasonal pattern is instructive. First-time users jump with every major sports season, and the 2025 football season - which the bank defines as September through February, so it sweeps in the NFL, college ball and most of the NBA and NHL - produced 22% more first-timers than the year before. Each season enrolls a larger freshman class. The class that enrolled this summer was three times the size of January's, and it arrived right before the busiest stretch of the calendar.

Nor is this something people try once and forget. Per a CivicScience survey cited in the note, 34% of online sports bettors wager weekly and 23% bet daily; fewer than one in five are the several-times-a-year Super Bowl crowd. That is the engagement profile of a social app, not a lottery ticket.

The turning point

By generation, Gen Z (48%) and Millennials (40%) accounted for 88% of online betting activity in July. Gen X managed 9%; Baby Boomers, 3%. And as recently as this spring, Millennials were the larger group. Gen Z overtook them this summer - a shift BofA describes as a "turning point" in the composition of online bettors.

BofA defines Gen Z as anyone born after 1995, which means the oldest members are turning 30 this year and the cohort came of age alongside legal, app-based sports betting. BofA points out that younger consumers have consistently been first to adopt every emerging digital platform - crypto, BNPL, online marketplaces - and that betting appears to be following the same script.

When it comes to income - betting activity is split almost evenly across terciles - 37% lower, 34% middle, 29% higher.

Oh it's investing!

According to a BofA survey conducted in March, 20% of respondents said they consider sports betting a form of investing, with Gen Z twice as likely as everyone else to say so. Across every generation, buying event contracts on a prediction market was more likely to be classified as investing than placing a sportsbook wager.

Prediction markets have listed contracts on almost anything - whether a politician sips water on camera during a speech, how many flu cases the year will bring - dressed in the language of derivatives: standardized, exchange-traded, resolved at a point in time. BofA notes that prediction markets, crypto, retail trading and sports betting all share "community participation and real-time pricing," which is a polite way of saying they share a user interface. To a generation raised on the Fed put, zero-day options and a community tab, a football game is simply another underlying.

And then there's  the red tape...

Naturally, the regulators have noticed - and, naturally, their first move is a jurisdictional fight. The CFTC's position, per BofA's public-policy team, is that certain event contracts traded on federally regulated exchanges are derivatives under the Commodity Exchange Act and therefore federal turf. State and tribal regulators counter that contracts tied to sports and entertainment are gambling with extra steps and belong under existing state gaming, licensing and consumer-protection law. Lawmakers from both parties and both chambers have filed bills. The CFTC has also opened a rulemaking on perpetual futures and issued an advisory warning event-contract venues away from sweepstakes-style rewards and prizes "based on pure chance" - the sort of promotional program that helped fill the summer's freshman class - and, per BofA Global Research, is trying to draw a brighter line between prediction markets and sportsbooks by targeting in-house market making, incentive programs and "casino style odds."

None of it slows adoption. Arguing over whether a contract is a "derivative" or a "wager" is an argument over who gets to regulate and tax the growth, not whether the growth happens. By the time the rulebook is written, the users will already be there. Most of them already are.

And it's not even football season yet...

Tyler Durden Fri, 09/04/2026 - 20:30

Cannabis Gummies Harm Driving Performance Hours After Use, Study Says

Authored by Naveen Athrappully via The Epoch Times,

The use of commercially available cannabis edibles impairs people's driving ability, even after several hours of consumption, a study has found.

Published in the JAMA Network Open journal on Aug. 31, the peer-reviewed study looked at simulated driving performance after the consumption of cannabis edibles.

Conducted in a Canadian hospital, the study analyzed data of 40 people aged 19-45 years. They received gummies containing delta-9-tetrahydrocannabinol (THC) - the main psychoactive chemical in cannabis that causes brain-altering effects. Various combinations of THC and placebo edibles were given to achieve four doses of THC exposure - 0 mg, 2 mg, 10 mg, and 20 mg.

The study measured the standard deviation of lateral position (SDLP), which assesses how drivers adjust lane position and is used to evaluate the effects of medicines and illegal drugs.

Researchers found that SDLP was "significantly increased" at 20 mg and 10 mg doses compared with the placebo at two and five hours post-consumption, suggesting greater difficulty in maintaining lane position.

Reaction time and the standard deviation of speed were "negatively influenced" among drivers due to THC exposure, the study said. The individual's willingness to drive was also found to have "significantly decreased" at 20 mg exposure, according to the study.

For the highest dose of 20 mg, whole-blood THC concentrations peaked at 3.4 nanograms per milliliter (ng/mL). This falls within the 1 to 5 ng/mL limits for drivers set by some U.S. states.

The Centre for Addiction and Mental Health in Toronto highlighted the link between driving impairment and blood THC levels in an Aug. 31 statement.

All peak blood THC concentrations in the study were below or near common thresholds used for roadside enforcement, the statement said. This was true even among those who consumed the highest dose.

"Many people may underestimate the impairment caused by cannabis edibles," Dr. Christine Wickens, co-author of the study, said in the statement. "Our findings show that commonly consumed doses can significantly affect critical driving skills, reinforcing the need for caution when making decisions about driving after use."

The study was funded by a grant from Public Safety Canada. Two authors reported conflicts of interest, including receiving grants from pharmaceutical companies.

In an April 20 statement, the University of Colorado Anschutz also reported similar findings. In these studies, people were made to use a driving simulator before and after consuming cannabis.

Cannabis was found to affect driving performance, especially lane-control measures, such as lane departures and weaving. Inhaling cannabis showed smaller and less consistent changes, while edible cannabis resulted in "more noticeable impairment, including slower speeds and increased lane variability and departures," the statement said.

US Cannabis Reclassification

In the United States, the Trump administration recently reclassified cannabis, or marijuana, under the Controlled Substances Act. On April 23, the Department of Justice and the Drug Enforcement Administration announced placing some cannabis products under Schedule III of the Act.

Schedule III drugs are deemed to have lower abuse potential and are accepted for medical use. The classification is only applicable to cannabis items approved by the Food and Drug Administration or regulated by a state medical marijuana license.

The American Trucking Associations (ATA) has raised concerns about public safety risks arising from the reclassification.

In an April 24 statement, Brenna Lyles, ATA's vice president of safety policy, highlighted concerns about rescheduling cannabis without proper safeguards to preserve the U.S. Department of Transportation's (USDOT's) testing authority for workers carrying out safety-sensitive jobs.

"Absent clear protections for USDOT's marijuana testing authority, a policy shift could undermine the Department's drug- and alcohol-testing program and weaken highway safety," Lyles said.

"That risk is compounded by the lack of a reliable, widely accepted standard to measure marijuana impairment, whether roadside or before a driver gets behind the wheel."

Tyler Durden Fri, 09/04/2026 - 20:05

This Red State Is Betting It Can Abolish Its Income Tax

The data center debate isn't going so well for the builders, as Americans far and wide seriously oppose the construction of new data centers near where they live. One state, however, thinks it can incentivize residents. 

Country roads take West Virginians home across the Virginia state line near Charles Town, where the data center debate has intensified. (Charlie Creitz/Fox News)

Virginia Gov. Patrick Morrisey (R) has unveiled seven principles aligned with 2025 legislation to reduce and eventually eliminate state income tax. Under the plan, West Virginia would set aside 50% of its revenue from approved hyperscale data center projects towards the elimination of the state personal income tax - though let's be clear: the poor, rural residents they'll be building the DCs next to don't pay income tax - so no benefit to them. Middle class voters (and up), however, will have all sorts of reasons to support the move. 

"Today, as the world stands on the cusp of a new digital and economic frontier, West Virginia is stepping forward once again to lead, not by repeating the mistakes of other states, but by implementing a proactive, 20-year development strategy on our terms," Morrisey said in a statement obtained by Fox News. 

The second listed "principle" in Morrisey’s plan says all West Virginians should benefit from data center projects approved through Charleston’s "High Impact Data Center Designation (HIDC)" process and the revenue they generate. The process was established under a separate 2025 state law.

Morrisey’s plan includes "direct tax relief for citizens," with none of the HIDC revenue entering the state general fund.

"By law, 50 percent of project revenue is dedicated directly to reducing and ultimately eliminating the State Personal Income Tax," reads the plan. 

Counties would benefit also - with those hosting data centers receiving 30% of the revenue for schools and local government, and 10% of the revenue distributed to all 55 counties. Another 10% will fund infrastructure upgrades, which include public water systems in a state that's struggled since the decline of the coal industry. 

"This shared framework gives us the exact blueprint we need to attract billions in private investment, create thousands of high-paying construction and technology jobs, lower taxes for our citizens, and revitalize economically distressed regions, all while preserving the wild and wonderful state we call home," said Morrisey. 

The anti-data center movement, meanwhile, has become quite vocal in neighboring Virginia's Jefferson and Berkeley counties - as residents have taken note of sprawling data centers in Loudoun county.

"We are a cautionary tale for the rest of the country," Rep. Suhas Subramanyam (D-VA) in recent remarks. "[I]f my district were a country, it would have more data centers than almost every other country in the world."

Tyler Durden Fri, 09/04/2026 - 19:40

Victor Davis Hanson: The Left Is Dragging America Back To The Dark Ages

Via The Daily Signal,

Editor's note: This is a lightly edited transcript of today's video from Daily Signal senior contributor Victor Davis Hanson. Subscribe to our YouTube channel to see more of his videos.

Hello, this is Victor Davis Hanson for the Daily Signal.

The more you look around us today, I think a good description of 2026, culturally, economically, socially, politically, is that we are in a modern medieval world.

Maybe we're progressive regressives, and I don't mean that just in the sense that progressives are regressive, and they are, but that one part of our society is advancing at lightning speed to the future and progressing. But the other part is regressing, and regressing at a phenomenal pace back to what I would call the medieval period.

Remember, the medieval period was roughly that area in time after the fall of the Roman Empire in the West, roughly AD 500 to around AD 1300 to 1400, the beginning of the Italian Renaissance. In medievalism, we often talk about primitivism after the destruction of the classical world during the Dark Ages, the early medieval period, and it's characterized by epidemics, bubonic plague, typhus, typhoid, smallpox, terrible sanitation in urban centers. They had forgotten the Roman use of sewage and aqueducts.

There were open borders. National states popped up that couldn't defend themselves, so you saw castles and walls pop up all over the European countryside in a way you had not during the Roman period. In cities, they were walled, towns even, and the gates closed at dusk to prevent gratuitous crime.

But at the same time that this was happening, you had some of the greatest works of literature in the Western world. You had Chaucer's "Canterbury Tales," Dante's "Inferno," St. Thomas Aquinas' "Summa Theologica." And if you look at the architectural expertise and scientific knowledge of architecture, it was progressing at a geometric rate when you look at the huge cathedrals at Seville or Cologne.

I should remind everybody that around 536, Santa Sofia was created, the Church of the Holy Wisdom in Constantinople. It would be the largest church in Christendom for a thousand years. And everything from the mass production of crossbows to eyeglasses was a product of the medieval period, even if, as I said, the daily lives of most people were wretched.

Now let's switch to the modern period.

All of us now can call anywhere in the world in seconds on our iPhones. Anything you want to know, past, present, future, you can just get on a cheap computer and ask an artificial intelligence program from the many free platforms. You can watch movies, you can watch entertainment on satellites. Anything you want is at your fingertips.

The nation itself is exploring space. We're getting close to conquering cancer. I can attest to that. Computers allow you to write without even speaking. You can, unfortunately, compose a whole term paper or a book with AI. You can make a movie with AI.

Yet at the same time that's happening, look at what's going on in Berkeley here in California or Los Angeles. We're seeing outbreaks of medieval diseases that we thought had been conquered years ago, given our sophisticated knowledge of sewage and water treatment. We had a typhus breakout in Los Angeles. We had leptospirosis, a rat disease, in Berkeley.

You look at the homeless camps all over our major cities. People are just out in the open fornicating, urinating, defecating, injecting drugs. There's tons of feces that has to be removed, and it's so strange in this modern medievalism.

We have sophisticated researchers who go into a hospital in Chicago or go to a cancer center in San Francisco and have to check the bottoms of their shoes to make sure they don't have feces as they go into their space-age laboratories.

It's really funny. In the medieval period, public hangings and beheadings were sort of public events that people flocked out to see. Is that any different than our glorification of murderers?

And there is a difference. Luigi Mangione, they named an opera after him in California. The killer of Charlie Kirk brought people jubilation. I won't even get into Lindsay Clancy, who strangled her three children and became every woman to the feminist left.

At least in the medieval period, they knew that the murderer had done something wrong and was being punished. In the post-medieval period, we are glorifying that murderer, and that's really striking.

And so, what I'm getting at is we are the most regulated, the most advanced, the most modern, the most scientific society in history, even as we can't solve problems that were solvable, and the medieval period would have died to know the solutions that we have in our hands to make sure we have clean water, to make sure there is no crime, to make sure there is no disease, to make sure that people don't defecate on the street. But we don't do it. We willingly don't do it.

Now, the question to finish is why?

We have an elite that has embraced a very toxic ideology throughout history, and that is mandated, government-sanctioned equality of result. And they have divided, therefore, to further that ideology, the world into victims and victimizers, an arbitrary classification, sometimes based on class, but increasingly on race.

And once they identify someone as a victim who's not responsible for his plight, then it's the duty of the society to allow him to express himself. If you have a lot of teenagers who want to loot a jewelry store, then you say they were hungry and they needed food.

If you see homeless people living on the street, then it was because of something the majority culture did to them.

And the result of that is when people engage in very dangerous antisocial behavior, an elite will tell the rest of us that they're not subject to law enforcement or they're not subject to the laws that apply to the rest of us.

But there are two really pernicious addenda here.

No. 1, the people who do this on the left, who believe in this mandated equality and a binary of victim and victimizer, are never subject to the consequences of their own ideology. Nancy Pelosi's home is not surrounded by homeless people. Jane Fonda doesn't have to trip over people injecting drugs when she walks outside her door. The Hollywood stars in Malibu who champion the homeless have very clear security. You can't get near their homes.

In other words, we, the lab rats, are those upon whom they experiment.

And there's another reason as well. It's not just that they experiment on us - and this ideology is not applicable to itself - but more importantly, they believe that they are morally superior because most of them are agnostics or atheists. They have lost their God, but they have found it in a post-Enlightenment caring, abstract though it may be, for victims.

And when you put this religious element to it, because it makes no sense to allow medieval diseases and medievalism to dominate your cities in crime, filth and homelessness, but they do it.

They feel morally superior, and it gives them meaning in their life in a way that we, the majority, find not morally superior, but morally repugnant.

We publish a variety of perspectives. Nothing written here is to be construed as representing the views of the Daily Signal or ZeroHedge.

Tyler Durden Fri, 09/04/2026 - 19:15

El Nino Crushes Atlantic Hurricane Activity, Lowest Since 1941

The peak of the Atlantic hurricane season arrives next Thursday, yet by this point the basin would normally have produced multiple systems tracking through the Caribbean, the Gulf of America, and the open Atlantic. This year, however, a strengthening El Niño and record vertical wind shear are tearing apart disturbances before they can rapidly intensify.

Bloomberg reports that only five short-lived tropical storms have formed this season, and none has intensified into a hurricane. The Atlantic has not recorded so little activity at this point in the season since 1941.

"We're crushing all sorts of shear records this year," said Phil Klotzbach, lead author of Colorado State University's annual seasonal forecast. "The models are so anemic on storm development coming up in the next 10 days too."

Forecasters and researchers are tracking accumulated cyclone energy, or ACE, which measures the combined strength and duration of tropical storms and hurricanes during a season.

"We currently have an ACE of 4.4," Klotzbach said. That is the lowest since 1941. A low ACE indicates that storms have generally been weak or short-lived, reflecting the fact that no tropical disturbance has intensified into a hurricane.

For the US energy complex, the absence of hurricane activity is great news. Gulf Coast refineries, offshore platforms, pipelines, and LNG export terminals have avoided precautionary shutdowns, allowing facilities to operate near full capacity as the global refined-products crisis deepens. This has been a boon for US producers as the country exports record volumes of crude oil and diesel. 

Still, a lull in tropical activity does not entirely rule out the possibility of a destructive late-season storm, as roughly 12.5 weeks remain before the season ends on November 30.

Meanwhile, Southern California and Hawaii are bracing for potential impacts from tropical systems over Labor Day weekend.

"It just seems like it's one storm after another out there because of the atmospheric conditions and the water being pretty warm," Robbie Berg, a warning coordination meteorologist at the National Hurricane Center, told the outlet, referring to the activity in the Pacific.

El Niño Impacts

"For an El Niño year, this is what we would expect," Berg said. 

Tyler Durden Fri, 09/04/2026 - 18:50

Asian Oil Buying Spree Sends Dubai Crude Toward $100

Authored by Irina Slav via OilPrice.com,

Stronger appetite for Middle Eastern crude grades from China and India has added upward pressure on prices for these grades, pushing the Dubai futures close to $100 per barrel, Bloomberg reported today, citing unnamed traders.

Demand for Middle Eastern oil is especially strong from refining majors such as Indian Oil Corp. and PetroChina, as well as refiners in South Korea and Japan, the report said. This is despite the latest escalation between the United States and Iran, with Saudi Arabia's oil exports dropping to the lowest since 2017, according to data from ship-trackers including Kpler and Vortexa.

A further price rally may well be on the table as some cargoes face delays from August to September and October, Bloomberg also noted. At the time of writing, Murban futures, the UAE benchmark, was trading at $106.10 per barrel, and DME Oman, the Middle East sour crude benchmark for Asia, was trading at $99.18 per barrel.

The stronger demand comes despite depressed flows of oil via the Strait of Hormuz. Over the past week, the average daily volume of oil making its way via the waterway stood at between 6 and 8 million barrels.

Asian buyers, meanwhile, are also stepping up purchases from other regions, notably Brazil, Canada, and Argentina, with China and India also buying more Russian crude.

While Middle Eastern oil prices rise, Brent crude and West Texas Intermediate dipped yesterday, reflecting uncertainty about developments in the Middle East even as mutual strikes between the United States and Iran continue. According to some analysts, the dip in prices came in response to a pause in the strikes. It appears traders believe the pause could extend, despite a statement by President Trump that "It was a very heavy attack last night, and we're prepared to do another one any time we want."

Tyler Durden Fri, 09/04/2026 - 18:25