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Willy Wonka And The Compute Factories

Zero Rss
3 weeks 4 days ago
Willy Wonka And The Compute Factories

By Benjamin Picton, Senior Market Strategist at Rabobank

Oil prices are rising again on news of the shutdown of Saudi Arabia’s East-West pipeline following drone strikes, and the Houthis’ seizure of strategic locations on the Red Sea coast.

Bond yields surged late last week on rising oil and inflation (and debt) concerns, while Asian equity indices and US equity futures are broadly in the red today. Geopolitical friction remains at the forefront of investor concerns as the Middle East and Eastern Europe simmer away, leaders of Scotland, Wales and Northern Ireland plot the dissolution of the United Kingdom, and Canada hatches a cunning plan to avoid becoming the 51st US state by (in effect) becoming the 28th EU member state.

So, another quiet week ahead.

Anthropic CEO Dario Amodei caused a sensation over the weekend by publishing an essay arguing “we must slow the pace at which we improve the capabilities of AI models”. Amodei’s call quickly found support from Elon Musk and Sam Altman, erstwhile Arthur Slugworths to Amodei’s Willy Wonka. Strange bedfellows indeed.

Amodei opens his essay by extoling the transformational potential of AI to create a Utopian world of superabundance where most major diseases are a thing of the past, economic growth is greatly accelerated, and a new renaissance of democracy and freedom is forthcoming. Come with me and you’ll be in a world of pure imagination.

The vision then turns darker with Amodei arguing that AI capabilities are advancing too quickly for society to appropriately manage the risks. That’s a sentiment that his fellow tech leaders apparently share, with Musk in particular previously arguing that AI could prove more dangerous than nuclear weapons. Curiously, this places founders in the unusual position of not only agreeing with each other but also favoring tighter regulation for their own businesses with future growth throttled.

Amodei points particularly to the recent emergence of ‘recursive self-improvement’ –AI building AI – as a source of potential risk, particularly following the OpenAI-Hugging Face incident whereby swarms of AI agents went rogue and began conducting cybersecurity attacks on targets that no human had asked them to attack. For anyone that has seen the Terminator or Matrix films, or read Frankenstein, or the Bible, the idea of Creation rebelling against Creator with disastrous consequences is a well-worn fear.

Fear is a great motivator, but any good markets person knows that greed is too. It didn’t take long for the cynics to emerge with alternative theories as to why founders might like to see tighter regulation, international coordination, and a slower pace of development. One commentator translated Amodei’s call as an admission that open source models are competing AI margins to zero while CAPEX burn rates threaten viability. The solution: regulatory intervention to limit competition and maintain margins.

Translation: our gross margins are getting competed down to 0 by open source models and our capex burn rate is too high.

Let’s maintain our margins with regulatory capture, ban open source models, and slow down the capex arms race. All with a virtue signaling cherry on top. https://t.co/70pusgSX8o

— Grant Hummer (@gphummer) September 12, 2026

Chair of the President’s Council of Advisors on Science and Technology, David Sacks, said that “if the unreleased models are scary enough that you think you should slow down. I support your decision to be responsible.” However, he then went on to suggest that the founders’ motivations were less than altruistic, that China was unlikely to join any agreement to slow the pace of AI development, and that founders were effectively lobbying for regulatory capture. His message: if you want to slow the pace of development, just do it yourselves.

The point about China is an important one. In a world of geopolitical competition, games that require coordination for humanity to come out a winner are hard and suboptimal outcomes can be Nash equilibriums (just look at Javier Blas’s recent tweet about soaring coal demand).

CHART OF THE DAY: Global coal demand has surprised the @IEA massively to the upside: it’s running ~1 billion tonnes higher (~9%) than the agency had expected only five years ago.

The forecasting error equals to the anual demand of the EU, Japan and the US — combined! pic.twitter.com/BfCHlV0DQ1

— Javier Blas (@JavierBlas) September 12, 2026

AI is national security, and China’s regular provision of Sputnik moments like the release of DeepSeek’s R1 model in January 2025 and Moonshot’s Kimi K3 model in July this year have raised concerns that China is closing the gap in terms of the capabilities of frontier AI, at lower cost, and with open source models. Effectively, another Arthur Slugworth’s almost-as-good recipes (the model) have been made public, and that is a big problem for Willy Wonka (and also for Arthur Slugworth).

While calls from CEOs for regulation might be viewed as self-serving, the imperative for national governments to control AI should be sufficiently underscored by recent revelations from Anthropic that users in northern Yemen – home to the Houthis – tried to use Claude AI to develop advanced missiles, and that Iran had tried to use Claude to target American warships. There is a sense that a Pandora’s Box has been opened and that both the United States and China have an interest in forcing the lid back down to control access to such a potentially dangerous technology.

Izabella Kaminska argues that AI safety concerns are being proffered as a “credible off ramp from the hyper scaling narrative”, which she views as defunct since the release of Kimi K3. Emphasis shifts from the models themselves to the compute, power and chips used to run them. If AI models are Wonka and Slugworth’s increasingly commoditised recipes, the datacentres, energy sources and semiconductors are the factories used to convert recipe into product – and are the real strategic assets. Turns out real production can matter more than IP, who knew?

Kaminska argues that hyper scaling was never driven by expected demand, but by an arms race of sorts. The financial firepower to fund AI investments was determinative, but if the raison d’etre for hyperscaling disappeared in July, so did the need for immense private capital flows. Could we be approaching a scenario where US AI capabilities are brought under a kind of Manhattan Project where freed-up liquidity flows constitute the asymmetric information that Scott ‘I am the House’ Bessent has been warning markets about?

This, plus the fact that the AI cycle will need $1.5 trillion in private credit funding, is why the US will have to throw private credit in the bailout bucket too.

Yes, a lot of things will need a bailout to win the AI wars. That's why the $ is reserve for now. https://t.co/ozlvzvD98K

— zerohedge (@zerohedge) November 18, 2025

This week might provide some clues in that respect as the FOMC meets to set the Fed Funds rate. Following last week’s firmer than expected core CPI reading and two weeks of rising oil prices the markets are 87% priced for a hike. RaboResearch’s Fed watcher Philip Marey has recently updated our forecast to also predict a hike at this week’s meeting. Meanwhile, the FT reports that hedge fund manager Stanley Druckenmiller (mentor to both Bessent and Fed Chair Warsh) recently told a closed audience that “given what’s going on in the economy and the capital spending boom and the war for capital, if anything, [bond yields seem] a little low”. Any indication that the war for capital might de-escalate would be a signal to pay close attention to!

Druckenmiller says that his fund has cut its AI investments to around 20% of previous levels, saying that “it has been an incredible ride on the whole AI thing... I think we’re getting late enough in the build-out that one has to start to worry a little”.

For his part, President Trump says that the pace of AI development should not slow down. Equity investors may be relieved to hear that, but given the geopolitical and bond market imperatives, and the increased prevalence of economic statecraft, perhaps they should pay some heed to other orange men with unusual hairstyles:

Oompa, Loompa, doom-pa-dee-da
If you're not greedy, you will go far
You will live in happiness too
Like the Oompa, Loompa, doompa-dee-do

Tyler Durden Mon, 09/14/2026 - 12:00
Tyler Durden

Costco Begins Rationing Kirkland Signature Motor Oil As Refined Crisis Spreads

Zero Rss
3 weeks 4 days ago
Costco Begins Rationing Kirkland Signature Motor Oil As Refined Crisis Spreads

Costco's Kirkland Signature motor oil has doubled in price, and customers now reportedly face a purchase limit as the Gulf energy conflict, combined with the Russia-Ukraine war, has sent the global refining market into a tailspin.

Auto news website The Auto Wire reports that a 10-quart package of Kirkland full-synthetic oil now costs about $58, up from around $30, with a new purchase limit of two packages per week.

Costco's online sales platform confirms an order limit: when attempting to order three packs, an alert message reads, "Item 997930 has a maximum order quantity of 2."

Another auto blog, MotorBiscuit, provided more detail on the refining crisis and its impact on the global liquids market:

The ongoing military entanglement with Iran and the blockade of the Strait of Hormuz have effectively choked off these crucial exports. To compound the supply chain disaster, the massive Pearl GTL facility in Qatar sustained heavy damage from Iranian airstrikes in March 2026, instantly crippling a major portion of global production for at least a year.

Refineries Chase 40-Year Profit Highs

Typically, when Middle Eastern supply lines fracture, South Korean refiners step in to pick up the slack. Unfortunately, those refiners are currently struggling to secure raw crude oil themselves.

Furthermore, the petroleum industry is aggressively shifting its manufacturing priorities. Right now, global profit margins for diesel and jet fuel have hit staggering 40-year highs. Motor oil, diesel, and aviation fuel all originate from the same barrels of raw crude. Given the choice between producing essential base oils for passenger cars or cashing in on incredibly lucrative aviation and commercial diesel markets, refiners are overwhelmingly choosing the latter.

This geopolitical squeeze is hitting at the exact worst time for everyday drivers. Today's highly stressed, turbocharged, small-displacement engines require incredibly sophisticated oil chemistries to prevent catastrophic failure and comply with strict environmental standards.

Because modern engines are so sensitive, automakers demand rigorous chemical testing and licensing. General Motors, for example, requires vendors to pay double licensing fees (both per product and per unit sold) just to print the "Dexos-approved" badge on their packaging. This certification appears directly on Costco's Kirkland brand.

Combine a fractured Middle Eastern supply chain, international refiners chasing diesel profits, and the expensive licensing fees required for modern engines, and you have the perfect storm for empty shelves.

It's not just motor oil. Households relying on heating oil face the risk of sharply higher bills as the Northern Hemisphere winter approaches. With the national average retail diesel at a record $6.23 a gallon Monday morning, the squeeze on distillate fuels and other refined fuels is causing a shock. However, electric vehicle owners are just sitting back, watching this all unfold. 

Tyler Durden Mon, 09/14/2026 - 11:45
Tyler Durden

49ers teammates renew Iowa-Iowa State trash talk after Hawkeyes win

NY Post
3 weeks 4 days ago
George Kittle waited until Iowa reclaimed the state’s bragging rights to reopen his favorite argument with Brock Purdy. The Hawkeyes rallied from a 10-point deficit and defeated Iowa State 16-13 on a 42-yard field goal in the closing seconds Saturday. Soon afterward, Kittle posted the final score to his Instagram story and addressed his 49ers...
Ryan Anderson

‘You lazy b—h’: Passenger calls out ‘rude’ man who refused to help with heavy bags — prompting airplane etiquette debate and death threats

NY Post
3 weeks 4 days ago
Common courtesy isn’t always plane and simple — especially at 30,000 feet.  A New York City tourist is receiving death threats after asking a fellow airline passenger to help lift her heavy luggage into an overhead bin on a recent flight to Hawaii. Her request — and her seatmate’s alleged “rude as f*** response” —...
Asia Grace

Trump Declares Ukraine, Russia Have Agreed To Halt All Attacks On Energy Targets

Zero Rss
3 weeks 4 days ago
Trump Declares Ukraine, Russia Have Agreed To Halt All Attacks On Energy Targets

Update(11:19)ET: Amid soaring national diesel products and painfully high prices at the pump, President Trump on Monday announced the Zelensky government has acceded to the US president's prior call to abstain from attacking diesel infrastructure in Russia. He has unveiled what he's presenting as a new Russia-Ukraine energy ceasefire.

Trump says "Ukraine has agreed not to hit Russian Energy targets. Russia has agreed to do, likewise! The World’s Diesel price rise is mostly caused by the Russia/ Ukraine War, not Iran." Clearly high fuel prices are creating immense pressure within the GOP, and Trump is trying to essentially tweet his way out of this war-related mess...

DIESEL FUTURES PARE GAINS, TRADE NEAR $5.04/GAL

Diesel responded immediately...

And also crude...

*  *  *

The Kremlin has welcomed President Trump's weekend call for Ukraine to stop attacking Russian diesel supply and infrastructure sites. The somewhat surprise remarks which will only serve to further pressure the Zelensky government came when pressed by a reporter on Sunday. Trump responded by saying Zelensky "has to do one thing. He has to stop knocking out diesel fuel in Russia."

The US president said at the sidelines of the Irish Open on Sunday, "There are plenty of other targets. Don’t hit diesel fuel, because that’s hurting, that’s hurting the world" - adding that he indeed had spoken to the Ukrainian president about it.

"I've asked Zelensky not to hit the Russian refineries. Diesel is being driven up by the fact that it’s having a hard time coming out of Russia," Trump additionally stated. "That’s a case that hurts the world, and we’ve got to stop it."

On Monday, Putin spokesman Dmitry Peskov was asked about Trump's words. "Of course, one can only welcome any call on the Kiev regime to stop strikes on civilian economic infrastructure," Peskov told a press briefing.

via Associated Press

The Kremlin official had been questioned on whether Putin views the US call to refrain from strikes on Russia's diesel-producing infrastructure a positive step toward a settlement of the Ukrainian conflict.

"Any countries can contribute to a settlement in Ukraine by influencing Kiev and pushing it toward flexibility," Peskov said, leaving things somewhat vague. He said that disabling of Saudi Arabia's East-West oil pipeline, which has reportedly knocked more than 4% of global supplies off the market, is cause of serious concern.

"The deterioration of the situation in oil markets cannot but cause concern among global economies," he emphasized. On that front, the Associated Press newly reports Monday:

A crucial Saudi oil pipeline hit in strikes will be mostly out of service for several weeks for repairs, reports AP citing officials

Specifically concerning the status of the 'special military operation' in Ukraine, the Putin spokesman described, "It is becoming increasingly clear to professionals, based on the dynamics at the front lines, that Russia is consistently moving toward achieving its goals in the special military operation."

He vowed: "The dynamics of advances at the front lines of the special military operation will continue; no one should have any doubts about that."

And he explained of the weekend New Delhi-hosted major BRICS summit, "Putin reacted positively to the readiness of the leaders of China and India to contribute to the Ukrainian settlement."

.@POTUS: "I've asked President Zelensky not to hit the diesel plants — refineries... Diesel is being driven up by the fact that it's having a hard time coming out of Russia." pic.twitter.com/G9P3tbsNMQ

— Scott Adams (@scottadamsshow) September 14, 2026

As for Ukraine, President Zelensky over the weekend pointed out that the country's own energy infrastructure has also subject of frequent attack by Russia.

"The Russians are burning warehouses with food and gas stations, pharmaceutical facilities and ordinary passenger trains, residential buildings and civilian businesses," Zelensky stated in a Sept.12 X post.

Tyler Durden Mon, 09/14/2026 - 11:19
Tyler Durden

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