Wednesday, June 10, 2026

"The AI trade's biggest winners take a hit"

From Yahoo Finance, June 9:

Semiconductor stocks cracked again on Tuesday, extending Friday's rout as sellers went back to dumping the market's biggest winners from the spring rally.

Then came a blistering late-day rally. The Philadelphia Semiconductor Index (^SOX) had been down nearly 9% at the lows before roaring back to finish down just 1.9%.

That rebound softened the close, but it did not erase the damage underneath the surface. By 1:00 p.m. ET, the chip index had suffered its steepest drop from the open since July 2002.

That made Tuesday less of a broad-market washout than another hit to the AI trade's leadership. In fact, the S&P 500 (^GSPC) had more advancers than decliners by early afternoon, with 356 stocks higher and 146 lower.

The pain was concentrated in the area where the rally had been strongest.

The 50 worst S&P 500 stocks since June 2 had posted a median gain of 36% from March 30 to June 2, according to Yahoo Finance analysis. The rest of the index had gained just 3% over the same two-month stretch.

https://s.yimg.com/ny/api/res/1.2/8dfOxnlg9M5pRnwUmUCGkg--/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTcwNQ--/https://d29szjachogqwa.cloudfront.net/images/user-uploaded/chart1-spx-top50-vs-rest-updated_8646.png 

The 50 worst S&P 500 names had a median gain of 44% from March 30 to June 2 versus 3% for the rest.

Since June 2, that former leadership bucket has been down a median 9.3%, while the rest of the S&P 500 is still up 2.0%....

....MUCH MORE 

Inflation: CPI Headline UP 0.5% Month-over-Month; UP 4.2% Year-over-Year

 From the Bureau of Labor Statistics, June 10:

CONSUMER PRICE INDEX - MAY 2026

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent on a seasonally adjusted basis in May, after rising 0.6 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 4.2 percent before seasonal adjustment.

The index for energy rose 3.9 percent in May, after rising 3.8 percent in April and 10.9 percent in March. The energy index accounted for over sixty percent of the monthly all items increase. The index for shelter also increased in May, rising 0.3 percent. The food index increased 0.2 percent over the month as the food at home index rose 0.1 percent and the food away from home index increased 0.3 percent. 

The index for all items less food and energy rose 0.2 percent in May. Indexes that increased over the month include communication, airline fares, medical care, personal care, and recreation. Conversely, the indexes for motor vehicle insurance, household furnishings and operations, and new vehicles were among the major indexes that decreased in May.

The all items index rose 4.2 percent for the 12 months ending May, after rising 3.8 percent for the 12 months ending April. The all items less food and energy index rose 2.9 percent over the year, following a 2.8-percent increase over the 12 months ending April. The energy index increased 23.5 percent for the 12 months ending May. The food index increased 3.1 percent over the last year....

....MUCH MORE including the always interesting Tables A and  2.

"Mira Murati Unveils Her Startup’s A.I. Model in First Interview Since OpenAI"

Following on May 28's AI: "The $2B Mira Murati Mystery".

From Observer, June 9:

With $2 billion in funding and a bench of former OpenAI, Meta and Anthropic talent, Murati is building a new lab around more collaborative, multimodal A.I. 

Mira Murati, the former CTO of OpenAI, left the A.I. giant in late 2024 to found her own startup, Thinking Machines Lab, and raised a staggering $2 billion in less than a year. In her first media interview since founding the startup, Murati revealed what she has been building: “interaction models,” or multimodal A.I. systems that process audio, text and video simultaneously and collaborate with humans in near real time, without waiting for prompts. “I have very high conviction that the way to continue building frontier A.I. systems is to [create] systems that are not just autonomously advancing and leaving civilization behind, but are more like a tandem bike,” she said onstage at Bloomberg Tech Summit last week.

“They’re continuously taking in audio, text, video, and continuously providing output,” Murati added, describing the model, called TML-Interaction-Small, which she plans to release publicly later this year.

Unlike many A.I. founders who climbed traditional computer science or venture capital ranks, Murati’s path is rooted in product management. She studied mechanical engineering at Dartmouth College, where she worked on building a hybrid race car. After graduating, she joined Tesla in 2013 as a product manager for the Model X. She later led product and engineering at augmented reality startup Leap Motion (now UltraLeap), focusing on motion-based human-computer interaction.

In 2018, Murati joined OpenAI as head of applied A.I. and partnerships, rising quickly to become chief technology officer. Over six years, she helped steer the deployment of some of the most influential A.I. products, including ChatGPT, DALL-E, and GPT-4....

....MUCH MORE

Other than all that, what's she ever done? 

If interested see also:

November 2023 - More On Q* and Q-Learning 

October 2024 - "OpenAI Executives Say AI Will Be Able to Do Any Job Within 10 Years" 

July 2025 -  Former OpenAI Chief Technology Officer Mira Murati Raises $2 Billion At $12 Billion Valuation From Jane Street, A16Z, Nvidia 

August 2025 - "Thanks for Your $1 Billion Job Offer, Mark Zuckerberg. I’m Gonna Pass." (META)

She is one of the reasons we note re: SoftBank's all-in wager on OpenAI:

...Should SoftBank be unable to repay or refinance the debts it is taking on, the risk goes from theoretical to kaboom pretty fast and all the other daisy-chain financings get stress-tested in a real-world cascade. 

And unfortunately chatbots in general and OpenAI/Sam Altman in particular may not be the future that Mr. Son seems to think.... 

And: 

...Throw in the fact that OpenAI and their ChatGPT may not be the ultimate winner of this unprecedented build-out and there are reasons to be hyper-aware. Stay tuned. 

Ahead of the U.S. CPI: "China May wholesale inflation hits near 4-year high on Iran war-led higher input costs, AI boom"

From CNBC, June 9/10:

  • The producer price index jumped 3.9% from a year ago, the highest since July 2022.
  • Consumer prices rose 1.2% in May from a year earlier, missing economists’ estimates of 1.3% growth.
  • Core CPI, excluding volatile food and energy prices, grew 1.1%, edging down from the 1.2% rise in the prior month. 

China’s wholesale prices rose at the fastest pace in nearly four years in May, driven by surging raw material costs due to the Iran war and an artificial intelligence investment boom, while consumer inflation came in below estimates.

The producer price index jumped 3.9% from a year ago, the highest since July 2022, topping economists’ forecast of 3.8%, and outpacing 2.8% in April, according to data released by the National Bureau of Statistics on Wednesday.

Wholesale prices returned to growth in March as the input cost surge stemming from the Middle East conflict lifted the economy out of its longest deflationary streak in decades. The Iran war has throttled traffic through the Strait of Hormuz, disrupting energy and raw material flows.

Factories’ purchasing prices for fuel and power climbed 10% year on year in May, widening from 4.4% in April. Costs for non-ferrous metal materials and wires surged 22%.

Aside from higher commodity costs, wholesale prices were also lifted by a growing demand for artificial intelligence computing power, pushing up prices for tech equipment and semiconductors.

“The accelerating shift to electrification, deepening AI adoption and surging computing demand pushed up prices across non-ferrous metals, electrical machinery and computer hardware,” Dong Lijuan, chief statistician at NBS, said in a statement Wednesday. Non-ferrous metal mining led gains at 36.5% year on year, with smelting up 24%....

....MUCH MORE 

World’s largest: Construction of 1,129-feet-long LNG ship begins in China

From Interesting Engineering, June 9:

The new QC-Max LNG vessel will offer 57 percent more cargo capacity while meeting strict global emissions standards. 

China’s shipbuilding industry reached another major milestone on Monday as Hudong-Zhonghua Shipbuilding, a subsidiary of China State Shipbuilding Corporation (CSSC), officially began construction of what it says will be the world’s first and largest 271,000-cubic-meter (9.6 million-cubic-foot) QC-Max liquefied natural gas (LNG) carrier.

This project marks a big step for China’s role in high-end shipbuilding. Experts say building this vessel comes at a time when global energy markets and trade are uncertain, so reliable LNG transport is more important than ever. The ship should boost confidence in the LNG supply chain and help move cleaner energy around the world. 

Massive jump in LNG transport capacity

The new carrier can carry much more cargo than today’s standard LNG ships. It is 1,129 feet (344 meters) long and uses the latest NO96 Super+ membrane system to store and transport liquefied natural gas at very low temperatures....

....MUCH MORE 

"The Colorado River’s largest reservoirs are heading toward a ‘system crash,’ experts warn"

 From the Salt Lake Tribune, June  5:

The warning comes as seven Western states and the federal government struggle to agree on new rules for managing the shrinking river. 

Boulder, Colo. • Colorado River experts and decision makers gathered in Boulder, Colorado, this week to discuss the future of the water supply for 40 million people across the Southwest. At the registration table, a new white paper set the tone for the conference at the Colorado Law School: “Colorado River Basin Storage Continues Slide Toward System Crash.”

If the Colorado River Basin has another dry year, even if water consumption is at or near historic lows, Lake Powell and Lake Mead will likely drop to levels that could threaten dam infrastructure and downstream deliveries to major southwest cities and agriculture hubs at the start of the 2028 water year, according to the paper co-authored by Colorado River experts.

If next year is more similar to a heavy snow year like 2023, then the nation’s two largest reservoirs would recover to an extent, but that cushion would likely only last for about two years, the paper says. 

“We’re going to have to work harder to save water than we have ever worked before in the 21st century,” said Jack Schmidt, one of the paper’s co-authors, in an interview before the conference.

The researchers intentionally didn’t use the “most extreme” years in their study, Schmidt added. For the dry scenario, they used historic flow data from 2025, the fifth driest year in the 21st century. The wet scenario used 2023 flows, which were the third highest in the past 26 years.

“We’re trying to lay out, in the starkest terms, where we’re at so that everybody understands the significance of the cuts that lie ahead,” Schmidt said. “We cannot go over the cliff.”

That “cliff” is dropping below “reasonably accessible storage,” which the paper defines as the water above 3,500 feet at Lake Powell and 975 feet at Lake Mead. The Bureau of Reclamation has identified these as critical elevations to protect hydropower production and infrastructure at the dams....

....MUCH MORE 

Tuesday, June 9, 2026

21st Century Headlines: "AH-64 Apache Crew Rescued By Drone Boat After Going Down Near Strait Of Hormuz"

From The War Zone, June 9:

This is the first known use of an uncrewed surface vessel to recover downed aircrew and is major sign of what's to come. 

A U.S. Navy uncrewed surface vessel (USV) found and rescued the crew of a U.S. Army Apache that went down overnight near the Strait of Hormuz, in the Gulf of Oman. This is the first known use of a drone boat executing a personnel recovery action as part of a military search and rescue operation, and it’s likely a glimpse of what’s to come. The cause of the incident is otherwise under investigation.

Navy Capt. Tim Hawkins, a U.S. Central Command (CENTCOM) spokesman, has confirmed the use of the Navy USV in the rescue effort to TWZ. This had already been hinted at by the mention of Task Force 59, the Navy’s main drone force in the Middle East, in an official CENTCOM statement. What specific type of drone boat was utilized in this case is not yet known. Task Force 59 operates a variety of USVs, including speedboat-like types. The Task Force has been experimenting with all types of new uncrewed naval technologies and this rescue is clearly a major win for the forward-looking unit....

....MUCH MORE 

"SoftBank’s Attempt to Get $6 Billion OpenAI Margin Loan Stalls"

Good. I'm not kidding when I say Mr. Son's penchant for leveraged beta could be a threat not just to the AI players but to the world economy. If the largest domino starts dropping it's hard to see it stopping short of a coordinated international bailout.

Keep an eye on 9984 - Tokyo Stock Exchange. Here's the last year of price action via TradingView:

 

6,400 Yen, last, down 648 (-9.19%) 

From Bloomberg, June 9: 

SoftBank Group Corp.’s talks with potential creditors to raise at least $6 billion from a margin loan backed by its OpenAI stake have stalled, people familiar with the matter said, just weeks after the Japanese conglomerate cut its initial target from $10 billion.

The company is considering various fundraising options, according to the people, who asked not to be identified discussing private matters. It could still move forward with the margin loan at a later stage, they added.

It’s unclear why the margin loan discussions stalled. Borrowers and creditors can pause and revisit fundraising discussions for various reasons, and SoftBank hasn’t elaborated on its plans, the people said. SoftBank had secured some $5 billion for the loan before the development, people familiar with the matter said, though it was unclear if those were verbal or written commitments.

SoftBank declined to comment.

The current inaction on the margin loan comes even after some of the potential lenders who had been pitched on it said that they’d started to consider it in a more favorable light, after news last month that the ChatGPT creator was preparing to file for an initial public offering. OpenAI said on Monday that it has filed confidentially for an IPO in the US, joining artificial intelligence rivals in tapping public markets to fund ambitious growth plans. The firm is working with Goldman Sachs Group Inc. and Morgan Stanley on a potential listing as soon as in the fall.

Markets have witnessed a broader debate in recent months about SoftBank’s commitments of more than $60 billion to OpenAI at a time when recent breakthroughs by rival Anthropic PBC have raised doubts for some investors about the business. Within SoftBank itself, some officials had grown anxious about that commitment.

Previously some of the potential creditors pitched on the margin loan had expressed concerns about the difficulty of reaching a valuation for an unlisted company like OpenAI. SoftBank had downsized the loan’s initial target size by 40% after facing hesitation from some of the potential lenders, people familiar with the matter said in May.

The Japanese company has been ramping up its broader AI plans. Late last month, it said that it plans to invest as much as €75 billion ($86.6 billion) to build artificial intelligence data center capacity in France, saying the country is poised to become a top European hub for AI infrastructure.

Looming in the background is a $40 billion bridge financing that supported the conglomerate’s investments in OpenAI, and which SoftBank must repay in March 2027. SoftBank has said that borrowing would likely be repaid “through the utilization of existing assets and other financing measures.”....

....MUCH MORE 

Recently:

June 2 - "AI revolution is ‘50x bigger’ than the dot-com boom: SoftBank’s Masayoshi Son to CNBC"
I assume Mr. Son is aware the term "dot.com" does not have the best connotations.

May 31 - SoftBank Says It Will Invest Up To €75 Billion To Build Data Centers In France

May 13 -"SoftBank profit more than triples to $12 billion on OpenAI stake gains"

As noted introducing April 22's "SoftBank Seeks $10 Billion Margin Loan Backed by OpenAI Shares": 

This is where the risk to the AI juggernaut and possibly the world economy is lurking.

Should SoftBank be unable to repay or refinance the debts it is taking on, the risk goes from theoretical to kaboom pretty fast and all the other daisy-chain financings get stress-tested in a real-world cascade. 

And unfortunately chatbots in general and OpenAI/Sam Altman in particular may not be the future that Mr. Son seems to think. 


Before that it was February 12's "Where Will SoftBank Get The Money To Fund Their Commitment To OpenAI?":

By writing-up their stake in OpenAI, naturellement.

And March 27:

"SoftBank Obtains $40B Bridge Facility for Additional OpenAI Investment"

Of all the possible weak links in the daisy-chain, and there are a few, SoftBank's increasingly central role is the most concerning.

Mr. Son's history, going back to the time he briefly held the title of world's richest person, is leveraged beta. No great technological insight (largest investor in WeWork) no fancy risk mitigation, just leverage in all its forms and like Sam Insull, at every level of the organization.

Throw in the fact that OpenAI and their ChatGPT may not be the ultimate winner of this unprecedented build-out and there are reasons to be hyper-aware. Stay tuned. 

That said, this loan should be okay (barring a depression where it can't be re-financed, à la Insull) it's all the other borrowings and what Mr. Son will do in the next couple years, that could cause worldwide problems.

And last year:

November 2025's - "SoftBank shares slide as Nvidia stake sale highlights AI funding needs"

That was a rookie fund manager's move, using your most liquid asset to fund your least liquid.

In the olden days proprietary traders/stock jobbers/proto-market makers would keep their share and bond certificates in a box—hence short against the box etc. And in that box the most speculative, least-liquid-in-a-crash certificates were on top ready to be tossed into the maw of a descending market, with the highest quality, most liquid shares at the bottom of the box.

It was a tell as to either the individual trader's finances or to the depth of a downturn to see certs from the bottom of the box coming onto the market.

As a side note, you can still get your stock in certificate form but it will cost you at least $500 per cert. The powers that be, Depository Trust, the brokers et al. really prefer you don't ask for the paper.

And dozens more. 

Possibly also of interest: 

April 28 - WSJ Exclusive: "OpenAI Misses Key Revenue, User Targets in High-Stakes Sprint Toward IPO"

April 28 -  "OpenAI-Linked Stocks Slump on Report of Startup Missing Targets"

Deutsche Bank: "Will the IPO wave derail equities?"

From Deutsche Bank Research, June 9:

Chart of the Day 

One of the most common questions we are hearing from clients right now is whether the mega wave of equity issuance hitting the US market could trigger a broader sell-off. With headlines dominated by blockbuster IPOs and issuance volumes accelerating, it is a natural concern — but history suggests the fear may be misplaced.

Our equity strategists Binky Chadha and Parag Thatte have looked closely at prior issuance cycles (see here), combining academic literature with empirical evidence from past waves. The conclusion is clear: equity issuance waves typically coincide with strong equity market returns, not market stress. The reason is that companies tend to issue when equity demand is strong, earnings momentum is healthy and investor risk appetite is elevated. In other words, causality usually runs from strong markets to issuance, rather than issuance causing markets to fall. This is very similar to my experiences in my former life as a credit strategist.

So how large is the current IPO wave? As our strategists note, US equity issuance has been rising steadily since early 2023, climbing from a quarterly run-rate low of around $30bn to roughly $120bn today. The coming months should mark a meaningful step-up, with a flurry of high-profile mega-IPOs expected to raise tens of billions of dollars each. Put into perspective, however, even the very largest expected IPOs amount to just over 0.1% of the S&P 500’s market capitalisation. See their piece for some great graphs....

Figure 1: Equity market returns are typically very strong before and during an issuance wave

.... MUCH MORE

Also at Deutsche Bank June 9: "Geopolitics beyond Iran"

If interested see also:

*** 
*Subjects near and dear: supply, demand, liquidity etc.

October 2008 - IPOs Produce Smallest Gains Since 1995 as Offerings Increase

Supply and demand. The one effect I can guarantee is the sopping up of billions of dollars and yuan* that would otherwise go into currently trading issues. IPO exits are not only a sign of a top but actually help bring them on by removing some liquidity....

December 2018 - "Nasdaq, 'Tech,' & IPOs are in for Gut-Wrencher"

The Fed's interest rate moves are not that big a deal.
I know that runs counter to a lot of commentary but the upticks are not a problem. Yet.
The bigger headwind facing the market is the Fed's balance sheet unwind sucking up liquidity.
And next year's planned mega-IPOs threatening to do the same....

September 2025 - "US IPO Activity On Track For Best Quarter Since Q1 2022"

This is what we were referring to introducing August 6's "Blackstone prepares portfolio companies for IPOs":

One of the reasons markets trend higher is a lack of new shares coming on to the market.

Over the last few months the IPO window has been opening and the offerings absorb buying power that would otherwise go into issues already trading.

See also: supply/demand.

The Wall Street marketeers are nothing if not opportunistic.

And depending on how much stuff they are primping, packaging, and pushing, this is why stock offerings tend to mark the short/intermediate-term tops in markets.

Just something to be aware of, not a hard and fast rule.

Regarding Mr. Grantham, though he is historically early—keeping in mind that if you are too early, you're not early, you're wrong, I think he is right about the market direction later this year, if not the exact trigger we will point back to.... 

June 1 -  Who Will Buy These Giant IPOs After They Begin Trading? You Will (SpaceX; OpenAI; Anthropic et al.)

Markets: "There's something wrong with our bloody ships today, Chatfield"

Helicopters too.

First up, lifted in toto from CNBC, June 9

Trump says U.S. must ‘respond’ after Iran shoots down helicopter over Hormuz Strait

  • President Donald Trump said the U.S. will “respond” as he accused Iran of shooting down an Apache helicopter that was patrolling over the Strait of Hormuz.
  • The two pilots involved in the attack “are safe and injured,” Trump wrote, but the U.S. still “must, of necessity, respond to this attack.” 

President Donald Trump on Tuesday said the U.S. will “respond” as he accused Iran of shooting down an Apache helicopter that was patrolling over the Strait of Hormuz.

The two pilots involved in the attack “are safe and injured,” Trump wrote in a Truth Social post. “Nevertheless, the United States must, of necessity, respond to this attack.”

U.S. Central Command earlier Tuesday revealed that the American AH-64 Apache had gone down “near the coast of Oman” on Monday evening ET.

Centcom did not initially blame Iran for the downing, saying in a statement that the incident is under investigation.

The two soldiers involved in the crash were rescued within about two hours by U.S. Naval Forces Central Command and the 82nd Airborne Division, Centcom’s post said.

Also at CNBC:
Stocks tumble, with Nasdaq shedding 3% as chip comeback fizzles: Live updates

*Comment of Admiral Beatty to his Flag Captain at the battle of Jutland after HMS Queen Mary blew up, 31 May 1916. It was the second of his ships to be destroyed in 25 minutes:
16:00 hrs-16:05 hrs, Indefatigable explodes leaving two survivors.
16:25 hrs, Queen Mary disintegrates, twenty survive.
2200 of his sailors vaporized. Admiral Beatty was a bit of a dimwit so he was, of course, promoted, appointed First Sea Lord and granted an Earldom.

Although I had posted the story a few times previously, the most memorable usage was on September 15, 2008:
Things that make you go "Hmmm" (AIG; LEH)
Watching Lehman crossing on the tape at two bits. The world's largest property casualty insurer in the $5's. Hmmm. ...
"There's something wrong with our bloody ships today, Chatfield"

"Big Banks Eye New AI Compute Trading Market" (plus using prediction markets)

 From PYMNTS.com, June 8:

Goldman Sachs and JPMorgan are considering entering the emerging compute trading market, The Information reported Monday (June 8), citing unnamed sources.

The banks are exploring trading futures contracts tied to rental prices for graphics processing units, as well as other ways to trade on the cost of computing power, according to the report.

They are in the early stages of exploration of the idea and may not move forward, the report said.

While compute trading is new, it could be a natural next step because banks already trade power and other commodities related to artificial intelligence (AI) infrastructure, per the report.

Making a formal financial market out of GPU rental pricing would enable prices to be tracked and hedged amid the current price swings of this major cost of AI, the report said.

At the same time, this emerging market faces challenges that include the need for a reliable price benchmark and the need to overcome potential regulatory hurdles, per the report.

Prediction market Polymarket said Tuesday (June 2) that it closed its first on-chain institutional block trade tied to AI compute infrastructure. The company said the transaction settled against Ornn AI’s Ornn Compute Price Index, which is a transaction-based benchmark that tracks Nvidia H100 GPU compute rental pricing.

“Prediction markets are emerging as one of the most powerful venues for institutional block trades, and this transaction is proof,” Brooke Rizzetto, head of institutional liquidity at Polymarket, said at the time in a press release. “Seeing an institutional counterparty use Polymarket to hedge real GPU compute exposure at scale is exactly the future we have been building toward.”

Google disclosed Friday (June 5) that it will pay SpaceX $920 million per month for compute capacity....

....MORE 

"China's role in US agriculture isn't what it used to be"

And if the latest work from Chinese plant geneticists is any indication, it never will be again.*

From Reuters: 

NAPERVILLE, Illinois, June 9 (Reuters) - The prospect of renewed Chinese interest in U.S. farm goods sparked excitement across grain markets last month, but enthusiasm has faded with no purchases immediately materializing.
 
The initial bullish reaction wasn’t surprising. China has dominated growth in U.S. agriculture, helping drive record soybean exports, supporting grain prices and emerging as a major buyer of everything ​from corn to beef.
 
Last month's trade agreement, which included at least $17 billion in U.S. agricultural purchases beyond existing soybean deals, revived hopes that China could again become a leading driver of growth for American ‌farm exports.
 
But years of trade tensions and South America's rise have changed the dynamic. China remains enormously important to U.S. agriculture, though its role now varies by commodity.

SOYBEANS: CHINA LEFT THE U.S., NOT THE MARKET

China's dependence on U.S. soybeans has fallen dramatically in recent years, though its influence over the global soybean market has not. The Asian buyer’s share of global imports has remained relatively steady around 60% for nearly two decades.
 
Chinese purchases of U.S. soybeans have sharply declined from the record levels seen earlier this decade as Brazil expanded production and exports. U.S. ​soybean export volume to China for the 2025/26 season, which ends on August 31, is set to fall almost 50% on the year to a 19-year low, according to the U.S. Department of Agriculture.
 
But by the end of May, China ​had secured more than 90% of its 2025/26 needs, according to industry estimates, on par with last year’s pace thanks to a notable boost in South American purchases.
 
Recent trade ⁠deals suggest that U.S. soybean exports to China could double in 2026/27, but the overall picture is less rosy....
....MUCH MORE including some handy charts and graphs: 
https://fingfx.thomsonreuters.com/gfx/breakingviews/dwvkyoqgnvm/Money%20managers'%20net%20position%20in%20U.S.%20grain%20and%20oilseed%20futures%20and%20options.png 
*June 4 - "Researchers May Put A Big Dent In China's Need To Import Plant Proteins"

"Trump admin pre-blames Europe for any World Cup Ebola"

Wut?

From Axios, June 8:

The Trump administration, fearing that international travel could accelerate the spread of Ebola as the World Cup hits America, is pressuring Europe to dramatically shift its strategy for preventing infections, sources tell Axios.

Why it matters: Top Trump aides are frustrated with Europe's limited travel restrictions and want it to abandon the World Health Organization's Ebola playbook in favor of Washington's tighter rules, a senior official said.

  • The implied message: Any outbreak of the Ebola virus in the U.S. would be Europe's fault.

Driving the news: The State Department last week sent an extraordinary request to European countries calling for travel restrictions from Central Africa, where the outbreak began.

  • "European countries must do their part to ensure this outbreak does not spread further," a State Department official told Axios. "Action is required now."

The World Cup kicks off Thursday and runs through July 19, with a record 48 teams, 104 matches and 11 of 16 host cities inside the U.S. Other matches will be in Canada and Mexico.

  • It's expected to draw 5 million to 7 million international visitors to the U.S., the State Department estimates — including players, staff and fans from the Democratic Republic of Congo, where the Ebola outbreak is centered....

....MUCH MORE 

 Also at Axios, June 8:

Houston launches Ebola dashboard ahead of World Cup 

"Leveraged ETF Goes Haywire in Korea With Wrong-Way 40% Moves"

From Bloomberg, June 8/9:

A leveraged exchange-traded fund tracking SK Hynix Inc. deviated sharply from the underlying stock’s move for a second day, underscoring the risk of investing in such products that have attracted strong retail interest.

The KIM ACE SK Hynix Single Stock Leverage ETF, designed to deliver twice the chipmaker’s daily return, plunged 27% on Tuesday even as SK Hynix jumped 16%. The divergence followed Monday’s dislocation, when the ETF soared 50% despite the stock falling nearly 8%.

The back-to-back wrong-way moves have intensified scrutiny of the ETF manager Korea Investment Management Co., which said yesterday’s anomaly for the $37 million product stemmed from a lack of liquidity. On Tuesday, the Korea Exchange KRX Flags 3 Leveraged SK Hynix ETFs for Possible Caution Status three funds, including KIM ACE, as potential candidates for an investment warning due to a divergence in their net asset value and market prices.

“Such dislocations are rare but not unprecedented,” said Jung In Yun, chief executive officer at Fibonacci Asset Management. “ETFs typically rely on market makers to keep prices aligned with underlying holdings. However, during the closing auction, those safeguards can weaken, particularly in niche products with limited trading volume.”....

....MUCH MORE 

As noted introducing 2021's What The Heck Is "Spatial Finance":

When losing money it is often a good idea to figure-out why you lost money. 

And if you can do so prior to the losses, you can immediately move on to new and hitherto undreamt-of ways to lose money....

Monday, June 8, 2026

"Coming El Niño will be the strongest ever recorded, new forecast predicts"

From LiveScience, June 5:

A June update by the European Centre for Medium-Range Weather Forecasts suggests that the coming weather event will be the strongest ever measured. 

This year's brewing El Niño will likely become the strongest ever recorded, a new forecast warns.

New predictions by the European Centre for Medium-Range Weather Forecasts (ECMWF) suggest sea surface temperatures in a key region of the central equatorial Pacific Ocean will climb 5.4 degrees Fahrenheit (3 degrees Celsius) above average by December of this year, with some scenarios showing they could go above 7.2 F (4 C).

The ECMWF has one of the better computer models for forecasting hurricanes. We'll see how it does with ENSO.

For comparison here is the prediction plume of statistical and dynamic computer models from IRI/Columbia last month:

El Niño: Columbia/IRI ENSO Forecast May 2026 Quick Look

The three sources we rely on for ENSO news are Australia's Bureau of Meteorology, Japan's "Japan Agency for Marine-Earth Science and Technology" (JAMSTEC) and Columbia/IRI.

JAMSTEC defined the modoki flavor of El Niño which arises in the central rather than the eastern Pacific with the Japanese word meaning "similar but different", handy for dropping casually into conversation at the Thursday afternoon salon. 

First, a note on terminology for normal people who don't obsess about this stuff:

  • ENSO = the El Niño/Southern Oscillation
  • ENSO Neutral = the ocean surface temperature anomaly in the ENSO 3.4 region is between +0.5°C and -0.5°C.
  • El Niño/La Niña conditions exist when the anomaly is greater than (Niño) or less than (Niña) the half-degree cut-off for neutral.
  • A full blown El Niño/La Niña is declared when the conditions persist for three overlapping three-month periods i.e. five consecutive months.

From Columbia University/International Research Institute for Climate and Society, May 19:

Published: May 19, 2026

A monthly summary of the status of El Niño, La Niña, and the Southern Oscillation, or ENSO, based on the NINO3.4 index (120-170W, 5S-5N)

As of mid-May 2026, the equatorial Pacific is rapidly transitioning into El Niño conditions. While monthly SST anomalies remain near the borderline El Niño threshold, weekly values have surged well above it, with the last three weekly pentads firmly reaching +0.9 °C in the Niño3.4 region. This sharp warming strongly indicates that the currently near neutral seasonal averages will rise substantially in the coming months, marking a clear shift from ENSO neutral to El Niño conditions. The latest CCSR/IRI ENSO plume forecast further supports this evolution, assigning a 98% probability to El Niño during May–July 2026 compared to only 2% for continued neutrality. El Niño conditions are then likely to persist through the remainder of 2026, with forecast probabilities consistently maintained within a remarkably high and narrow 97–98% range....

....MUCH MORE 

One of the many charts and graphs, the plume of predictions, both statistical and dynamical:

https://ensoforecast.iri.columbia.edu/cgi-bin/sst_table_img?month=4&year=2026 

Though the two averages (thick lines) are quite high, the outliers, above 2.5°C anomaly and even a few forecasting a +3.0°C anomaly are among the highest in years.

Finally, although all three sites are excellent, and NOAA in the U.S. is the go-to for many who are attempting the dark arts of layering one complex/chaotic system, financial markets, on top of another complex/chaotic system ENSO/weather, it is only with JAMSTEC that you also get the:

Institute for Extra-cutting-edge Science and Technology Avant-garde Research of Life (X-star)


Finally as noted introducing an earlier post:
May 14, 2026 
Drought:Intensifying, Spreading Across The U.S.

This is the first time this year we've posted the Drought Monitor map.

There seems to be an El Niño developing off the coast of South America which would mitigate some of the dryness in the southern and central U.S. Meaning that as all around you are losing their heads shouting "drought, drought" there would be wetter weather just over the horizon which would ruin any long futures one had on corn, beans or wheat.

However! If the arrival of the moisture is delayed much past July 1 it could be just awful for the farmers. So this is a heads-up but not actionable. Yet.

Layering one complex/chaotic system, financial derivatives, on top of another complex/chaotic system, weather can get interesting in ways even the best supercomputers haven't quite figured out.

From the University of Nebraska-Lincoln, May 14 (data through May 12):

This Week's Drought Summary...

Show of Hands: Who Else Is More Excited By the Upcoming Producer Price Index Than By The CPI?

Specifically Table 2 in its many incarnations. Here's the FRED database from the St. Louis Federal Reserve Bank through last month's report: 


Would you look at that!

Here's the detailed version of the May 13 release. (329 page PDF)

Control+F " Electronic Component"

Yikes. 

Isn't It Time To Demand Humanoid Robots Start Wearing Clothes?

From Korea's Seoul Economic Daily, June 8:

Hansae Vice Chairman Vows to Make Clothing for Humanoid Robots

  • Preparing for Humanoids, "Seizing an Untapped Market"
  • Cooling, Functional, and Stretch Material Technology Expands to Robots
  • Next-Generation Clothing Designed for Joints and Sensors Unveiled 

"If humanoids enter our lives, they too will need clothes to wear."

Kim Ick-hwan, vice chairman of Hansae, unveiled Monday a vision to evolve the company into a firm that proactively researches clothing and functional materials needed for the era of humanoids and robots.

Hansae held a future clothing exhibition, "Wear the Future," at the Textile Center in Samseong-dong, Seoul, that day, and presented its clothing concepts and research direction targeting the humanoid era through a media briefing. While the market has yet to form, the company explained that considering the pace of advancement in artificial intelligence (AI) and robotics technology, it could become a new growth axis for the future clothing industry. "If the stage after 3D was AI, now it is humanoids and robots," Kim stressed. "The company that makes the best clothes for people can also make the best clothes for robots."...

....MUCH MORE 

"The End of the Sustainability Premium"

From Observer, June 5:

The sustainability movement has spent years asking how much extra customers will pay for responsible products. The more important question is how sustainability can help create better products, lower costs and stronger customer loyalty. 

For years, executives were sold a compelling idea: doing good would also mean doing well. Surveys suggested that consumers were increasingly willing to pay more for products seen (or marketed) as better for the planet. Consultants reinforced the message. Investors rewarded ambitious environmental commitments. Companies launched wave after wave of sustainable products, expecting customers to reward their efforts at the checkout counter.

The research seemed to justify the confidence. In 2020, consulting firm Kearney reported that 70 percent of consumers said they were willing to pay up to 10 percent more for sustainable products. Another consultant, Bain, surveyed more than 23,000 consumers across eleven countries in 2023 and found that 64 percent reported high levels of concern about sustainability. McKinsey went further, declaring that consumers not only cared about sustainability but were backing those concerns with their wallets. 

The problem is that they weren’t. When McKinsey tested actual willingness to pay using an auction-based methodology, consumers were willing to pay an average premium of just 2.2 percent for sustainability across three everyday products: yogurt, shampoo and T-shirts. Similarly, a study by European e-commerce firm Zalando involving 2,500 consumers found that while 60 percent said sustainability transparency was important to them, only 20 percent actively sought that information during a purchase. This is what researchers call the say-do gap: the distance between what people tell pollsters and what they actually do in stores....

....MUCH MORE    

Markets: "You See What You Want To See And You Hear What You Want To Hear"

A quick scan of the market commentariat finds arguments that the living will envy the dead at one extreme to:

https://substackcdn.com/image/fetch/$s_!Om_g!,w_1272,h_847,c_fill,f_webp,q_auto:good,fl_progressive:steep,g_center/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fbf8d1263-ff59-4c5a-919a-ebefd4656326_1200x900.jpeg 

at the other.  

However, the thing to remember about markets is: You don't have to do anything. 

Here's a repost of a December 13, 2013 post, "Intertemporal Arbitrage: "Winning Big by Playing Long-Term Trends" (CNI; PNR)":

From our December 3 post "UPDATED--The Economist On How the Commodity Quants Lost It":

I am having great difficulty with the idea that hedge funds couldn't find a way to make money, more after the jump....

...The bolded bit points up one of the failures of the fund managers.
They get paid to figure out the intertemporal arbitrage, a fancy way of saying the task at hand is to understand the time period that gives the fund the greatest advantage versus the market.

The classic example is the individual investor realizing that he can't compete with HFT and looking at longer than nanosecond time periods. This opens up the possibility of not just not-competing with the traders with the lowest latency but of taking advantage of mispricings caused by their behavior. This is exemplified by one of Buffett's baseball metaphors (he has quite a few):
In investments, there's no such thing as a called strike. You can stand there at the plate and the pitcher can throw a ball right down the middle; and if it's General Motors at 47 and you don't know enough to decide on General Motors at 47, you let it go right on by and no one's going to call a strike. The only way you can have a strike is to swing and miss.
The point is, you don't have to be at the market every second You are afforded the luxury of just waiting for the perfect pitch.

Now for a fund manager it get's tricky writing the quarterly report and saying "We didn't do much in Q3, we're waiting for Mr. Market to give us the high hanging curve ball" but if you've been honest with the investors that the tactic you've pulled from the toolbox is akin to the military's hurry-up-and-wait sense of time it is doable.

As a side note anyone who considers a move that is measured in weeks to be a trend is nuts. A trend is John Templeton going into the Japanese markets at 2 times earnings and catching a 40-fold move 1965-1989....

And the headline? It's the Rock Man talking to Oblio in the Land of Point.

He first showed up on our little blog in October 2008:

"The Rock Man said, "Say, babe, there ain't nothing pointless about this gig. The thing is you see what you want to see and you hear what you want to hear. You dig? Did you ever see Paris?"

"No."

"Did you ever see New Deli?"

"No."

"Well, that's it. You see what you want to see and you hear what you want to hear." And with that the Rock Man fell soundly asleep... 
—from Harry Nilsson's The Point!

For our younger readers October 2008 was a time of great tumult in the markets.

So much so that for months after the 50%+ collapse had halted I referred to the period September 2008 - March 2009 as "The recent unpleasantness" so as not to trigger flashbacks and PTSD among the survivors. 

Sunday, June 7, 2026

"The rise of the sub-national power: Why mayors and regional bosses will rule the world"

A bloke named Lennon noted there were 4000 holes in Blackburn, Lancashire. And that was in 1967.

Nobody wants to fix the potholes. We've looked at this topic a few times.

From Brussels Signal, May 21:

It is not an accident that the man most likely to replace Keir Starmer as British Prime Minister is Andy Burnham, the directly elected Mayor of Greater Manchester. Such is his myth and reputation, built on a perceived decade-long record of delivering some improvements in local government and public services, that he is now known, at least in Labour circles, as the “King of the North”. We live in an age when, more than ever, the political classes are discredited by their broken promises and the increasing prevalence of parliamentarians with no real-life work experience beyond politics itself. So, leaders who have demonstrated they can do something – anything – in practice, even at the head of some kind of a sub-national authority, tend to have an advantage with voters exasperated by the run-of-the-mill politicians who believe in nothing and can only offer more empty words and slogans.

Boris Johnson followed a similar path: His tenure as Mayor of London (2008–2016) strengthened his national name recognition and gave him a power base that ultimately propelled him to Downing Street. But none of this is new, of course. Jacques Chirac used 18 years as Mayor of Paris (1977-1995) as a springboard to the French presidency. José María Aznar was provincial president before becoming Spanish Prime Minister. Germany has a strong tradition of state (Lander) premiers or big-city mayors – from Adenauer and Brandt to Kohl and Scholz – moving to the Chancellery. At the other end of Europe, Romania’s last three presidents were previously mayors; and the runner-up in Poland’s presidential election last year was the mayor of Warsaw. Even Vladimir Putin’s early power base was rooted in St Petersburg networks, where he served as deputy mayor.

The path from local government – or, for wider applicability, “sub-national” power – to the very top of a country’s political system is, therefore, well trodden. But we tend to discount the extent to which it is turning into the main route to supreme power, or the ways in which it is competing with national power to begin with. The fact is that in the 21st century the lower levels of government are growing in influence, legitimacy and resources while central administrations are increasingly failing.

This is one of the most important structural tensions that modern states – irrespective of their outlook on the democratic-authoritarian spectrum – must resolve soon. It is also one that receives comparatively little attention, as such. Certain types of pundits may obsess over supranational projects and schemes – such as the EU’s ever-closer union or ideas like CANZUK – hoping to bring whole states into new consortia, on the assumption that great “blocs” are required in order to compete effectively in a world dominated by the US and China.

But the real – and perhaps more desirable – shift in political power is heading in the opposite direction: Downwards from state-level authority to sub-national leaders in charge of provincial governments or great municipalities. The dream of re-creating imperial-sized entities may continue on paper, but the harsher reality is that larger polities, today, only compound the problems of managing complex modern systems at vast scale. National-level dysfunction is spreading, and across this landscape of growing failure and frustration some of the only good news in terms of governance and things like public service performance comes from sub-national authorities....

....MUCH MORE

Also at Brussels Signal: 

Bataclan terrorist already granted penitentiary leave in Belgium 

EU’s Spring 2026 Economic Forecast sees growth down, inflation up 

We are not as sanguine as the writer regarding the trend of expanding mayoral power. 
Previously:

October 2021 -  Global Warming: London's Mayor "to call for cities like London to have greater powers and funding"

....In the introduction to October 14's BlackRock's Larry Fink: "Rich Countries Must Bear the Cost if We Can Ever Hope to Achieve a Net-Zero World":

Having studied the science, economics, politics, finance, psychology, law, messaging, regulation, sociology, and policy prescriptions of global warming since 1992 the overriding lesson learned is:
It's always about the money.

If you take away nothing else from this little blog, take that.

And save yourself an eighth-of-a-million pages of reading.
I obviously wasn't thinking large enough.

It's also about power.

And although the two are to a large extent fungible (see the next post for an example) money and power are separate and distinct manifestations of the reality of human existence.

And earlier looks at various aspects of mayoral might and moolah:

Trends to Watch: "Can mayors actually rule the world?"

In low-key but very persistent ways technocrats* have been aiming at this target for years and now it seems to be gathering some momentum. Here's a good introduction by Harvard's Diane Davis.

"Mayoral Powers in the Age of New Localism"

One of the problems with politics is that the people attracted to power are exactly the ones who should not be allowed anywhere near it.
Go figure.

We've been watching the mission-creep trend in municipal governance for a while now, trying to get in front of it—"Il faut bien que je les suive, puisque je suis leur chef"*—to make a bucko or two but, to date, have only come up with the tautology that these people would rather jet off to Buenos Aires during the Northern Hemisphere winter for the Global Parliament of Mayors** than stay home and fix potholes.
It was ever thus, or at least has been since 1967 when John Lennon noted "4000 holes in Blackburn, Lancashire"

*Ledru-Rollin, 1848—schoolboy French translation: "I must follow them for I am their leader."
**This year the get-together was actually held in Stavanger in late September. Nice 'hood, nice time of year.
"Cities Are Rising in Influence and Power on the Global Stage"
A subject near and dear to our jaded hearts.
It's the manifestation of the age-old thirst for power, to make the world as you want it, and an acknowledgement that fixing potholes is boring.

A Warning On Mayors Ruling The World From A Surprising Source

There is a determined push to decrease the importance of nation-states while elevating the worldwide political power of municipalities and their mayors, a trend I had assumed CityLab backed come hell-or-high-water.
Maybe not.
The writer of this piece, Amy Liu, hangs her hat at Brookings....

"Gadabout Urbanist Richard Florida Has a New Book... 

"It advises cities on what to do about problems that result from advice he gave them in his previous books..."

 "Why nation-states are good"

Yesterday two Alphavilleins, Izabella Kaminska on Twitter and Kadhim Shubber in the Further Reading post highlighted this Dani Rodrik essay at Aeon.

We've been kicking around ideas on how to profit from a devolution of power from larger entities (nation-states) to smaller (city-states) should said devolution occur. So, stealing a way of thinking from Eisenhower, in another context, obvs.:

In preparing for battle I have always found that plans are useless, but planning is indispensable.
- Dwight D. Eisenhower 

Our most recent piece on what may or may not be a phenomena was last month's "Return of the City-State, Or: The End of the Nation State May Be Upon Us" which also linked to Aeon.

I'm not sure where Kadhim comes down on the structure-of-power thing but I suspect Izabella might not be aghast at a return to prominence of the Baltic City-States although probably not the Hanseatic League... 

And many more, you know the drill.