Zero Rss

Macron Vows To Fast-Track More Missile Interceptors For Ukraine After Deadly Mall Strike

Recent deadly Russian attack waves on Ukrainian cities - especially the capital - have prompted France to announce it will be speeding up deliveries of anti-air defense missiles to the Ukrainian armed forces.

It also comes after after a call between French President Emmanuel Macron and Ukraine's Volodymyr Zelensky - which focused on the country's rapidly dwindling supplies of interceptor missiles.

via AFP

Macron specifically referenced a Friday Russian drone attack on the city of Kryvyi Rih, which happens to be Zelensky's hometown.

Two Russian drones in succession hit the Sun Gallery shopping center in the city, resulting in a death toll of 16 people, with approximately 130 others wounded.

"I expressed our horror and our emotion to him," Macron said of the Zelensky call. "With these strikes and those this week against Kyiv, Russia is continuing and intensifying the crime of its aggression. By systematically targeting civilians, and by choosing intimidation and escalation, Russia is likely seeking to project strength but is above all revealing an admission of weakness."

Vowing to increase collective Western pressure on Moscow, Macron announced the following:

In this context, it is crucial to provide Ukraine with all the necessary means to defend its skies and thwart this aggression. I announced to President Zelensky the strengthening of our support, with the delivery of interceptors and the continuation of our cooperation in the wake of the launch meeting of the Anti-Missile Coalition held in Paris on July 13 last and the letter of intent signed on November 17, 2025. It is essential that all countries with capabilities at their disposal also join this effort.

Macron has also indicated that his country is leading the charge in seeking to develop European alternatives to the US Patriot missile system, given it is widely acknowledged that the Patriot is the only weapon currently possessed by Ukraine capable of downing high-speed ballistic missiles.

Members of Europe's 'Coalition of the Willing' are meeting again Monday:

French President Emmanuel Macron, U.K. Prime Minister Andy Burnham and German Chancellor Friedrich Merz will co-chair a Coalition of the Willing meeting Monday aimed at strengthening support for Ukraine and increasing pressure on Russia.

European leaders are pledging further support to Kyiv, days after a Russian drone attack on a crowded shopping mall in Kryvyi Rih killed at least 16 people.

One former US official has given new insight into just how low Ukraine's Patriot supplies have dwindled.

Below: Russian drone strike hit shopping center in Kryvyi Rih days ago...

At least 5 killed and nearly 100 wounded after Russia struck the "Sun Gallery" shopping mall in Kryvyi Rih, Ukraine. The second Geran-type drone hit the scene once emergency crews were already on site.@Archer83Able pic.twitter.com/7GK6w6ULbI

— Open Source Intel (@Osint613) August 21, 2026

"Ukrainian President Volodymyr Zelenskyy asked the U.S. for about 5 percent of its remaining Patriot inventory in a meeting with Mike Pence, the former vice president said Sunday," Politico reports. According to more of his comments:

If the U.S. could spare 5 percent of its missile defense system, Pence said Zelenskyy told him, then "he believes that would get them through the winter months."

Zelensky in early August had said Ukraine received only a third as many air-defense interceptors so far in 2026 compared to the same period in 2025.

"Our partners have the missiles. What is needed are the necessary political decisions on deliveries and on accelerating production, including localization in Ukraine," Zelenskyy said at the time.

Tyler Durden Mon, 08/24/2026 - 09:20

Texas Governor Floats Prosecution Of Airports Over Muslim Foot-Washing Fountains

Authored by Jeremy Lott via The Epoch Times,

Texas Gov. Greg Abbott, a Republican, made his second push in two weeks to halt the Muslim foot washing facilities at his state's airports on Friday.

"DFW [Dallas Fort Worth International Airport] stopped plans to install additional Islamic wudu washing facilities after I threatened to withhold state grants to entities operating these airports," Abbott wrote in an Aug. 21 X post.

The governor also wants DFW to remove two foot washing stations in one interfaith chapel, and Houston's George Bush Intercontinental Airport to remove its more extensive foot washing facilities.

Abbott wrote that he had "referred both government-owned airports to the U.S. Department of Justice for investigation and enforcement" and added: "If the existing facilities are on city owned property, Texas will pursue litigation for religious discrimination at taxpayer-funded facilities."

DFW Says Stations Stay

A DFW spokesperson told The Epoch Times last week that it "accelerated its review due to elevated public interest" and "determined not to proceed."

The airport's response to the governor's second demand was different. DFW sent a same-day letter that it shared with The Epoch Times laying out why it will not be removing anything.

In the letter, signed by DFW CEO Chris McLaughlin, DFW said it had shelved plans for a larger foot washing facility while at the same time "respectfully disagree[ing] that the installation of the stations would discriminate against any religious view in violation of law."

The proposal for a larger prayer washing room grew out of an "observed health and safety concern," which DFW said it had the "legal authority to address."

Observant Muslims pray at five distinct times in a day, and some amount of body washing is typically required to cleanse them for those prayers.

The faithful have to get that water from somewhere. DFW wrote that its staff "observed an increasing number of individuals using bathroom sinks to wash feet." This created a "potential slip and fall hazard because the bathroom sinks are not designed for this purpose."

Regarding the existing small washing stations located in the interfaith chapel on Concourse D, for international flights, DFW wrote that those stations are "open and available to all."

Whether or not to use them is a "private choice," and any visitor to the airport may make use of them for "either a secular or religious purpose."

Because all can access the foot washing stations, "there is no unfair treatment," DFW wrote. It added that no federal or state grant funds were used to install the foot fountains.

Houston Mayor Weighs In

The Houston airport shared a lengthy statement by Houston Mayor John Whitmire, a Democrat, with The Epoch Times.

"The ablution room at the George Bush Intercontinental Airport (IAH) was developed and approved by the previous administration of Mayor Sylvester Turner," Whitmire said, and it started operating during his own administration in 2024.

The expansion that the washing room was part of "was paid for by fees charged to the international airlines," Whitmire said, and taxpayer funds from city, state, or federal sources were not used.

He also made the case for its inclusiveness, saying that the washing room and the "adjoining prayer room are open to all travelers, employees and stakeholders with access to Terminal D, regardless of faith."

The Houston airport has interfaith chapels and, taken together, "these facilities serve travelers of all faiths and beliefs," he said.

"Therefore, their operations do not entail any discriminatory actions," Whitmire said.

The Houston mayor said that before the facilities were provided, passengers often used sinks in the airport's bathrooms for foot washing.

Neither the mayor nor the Houston airport have indicated that there is any plan to remove the facilities in response to the Texas governor's statements.

Muslims and the First Amendment

Reactions to the controversy have been varied. The Texas chapter of the Council on American-Islamic Relations sent a statement to The Epoch Times calling it an "anti-Muslim political stunt" on the governor's part and thanking the Houston mayor for "debunking" some of Abbott's claims.

Justin Butterfield, director of litigation at the Heritage Foundation, suggested that this controversy is not happening in a vacuum.

"There are two principles at play," Butterfield told The Epoch Times. "Government should accommodate religion robustly but shouldn't grant coercive power to one faith to invidiously discriminate against all others."

Apart from the specifics of this case, Butterfield said that the governor is "rightly concerned about the risk of a group demanding more than accommodation by declaring public spaces theirs and coercing others to comply with their religious beliefs."

Butterfield gave the example of a mosque in the Dallas metro area that "sued preachers and their church for handing out Christian literature on a public sidewalk near the mosque" last December. The case was eventually thrown out on First Amendment grounds.

Texas has a sizable Muslim population, with more than 310,000 Muslims living in the state. In raw numbers, that puts it behind New York, California, Illinois, and New Jersey, but ahead of Michigan.

The total Muslim population of the United States currently clocks in at just under 4.5 million, according to World Population Review figures.

Tyler Durden Mon, 08/24/2026 - 08:50

Rumor Of Imminent New Russian Mobilization Sends More Young Men Fleeing Across Borders

Ukraine alleges that the Kremlin is on the brink of mobilizing another 300,000 troops later this year in order to make up for significant battlefield losses.

"Russia has lost 267,000 personnel since the start of the year, including around 155,000 killed to date," Ukrainian President Volodymyr Zelensky claimed in remarks released Sunday. "We are confident that following the elections, they will carry out a mobilization. We believe this will not take place in the major cities."

Border crossing into the Republic of Georgia, via AFP

Zelensky further asserted his belief that Putin would "deploy the 300,000 newly mobilized troops depending on the situation in the east of our country."

Neither side has ever issued public war casualty figures, and so Zelensky's claim of the massive number of Russia soldiers killed remains impossible to evaluate accurately.

But as for preparations for a new wave of mobilization on the Russian side, The Wall Street Journal says that this rings true. The publication has chronicled some anecdotal evidence, seeing signs of serious preparation.

"Last month Russian military officers flew from St. Petersburg to the country’s Kaliningrad exclave nestled between two NATO countries and the Baltic Sea," WSJ reports. "There the officers oversaw readiness planning and procedures for a mobilization of the region’s residents, with details on how to house, feed and arm them, said Western intelligence officials."

Speaking more of the Russian exclave, the report continues: "The planning exercise in Kaliningrad is just one of many being carried out nationwide, said the officials, in case the call is made."

Officials cited in the report have said no concrete decisions have been made as of yet, and which is unlikely to happen until after parliamentary elections in late September.

WSJ sees it as a sign that while Russian forces have clearly been able to hold territory gained in the Donbass region, it has come at a huge and grim cost:

In recent months, Moscow has failed to recruit enough new soldiers to make up for those killed and injured on the battlefield, while Ukrainian drone advances have reduced the average Russian soldier’s lifespan on the front to a matter of minutes, days or weeks. Those problems in manpower may leave Putin with no choice other than to order a fresh wave of mobilization not seen in years, U.S. and European officials said.

It must be remembered that on a legal-technical level, for Russia the Ukraine conflict remains only at the level of 'special military operation'. Some skeptics are calling the content of the WSJ piece largely propaganda. 

Still, the fresh rumors of an imminent large-scale mobilization are already prompting signs of a potential exodus from Russia, WSJ further describes.

Below: Purported recent scene at the the Russia-Abkhazia border checkpoint...

At the Russia–Abkhazia border checkpoint, Russians are trying to flee mobilization. They don’t want to be sent to the front as cannon fodder. pic.twitter.com/56eerLeISL

— распад и неуважение (@VictorKvert2008) August 22, 2026

Men of conscription age are reportedly seeking ways to leave the country, with neighboring Georgia and Armenia seeing real estate prices rise amid expectations that a new wave of Russian immigrants could arrive.

Moscow customs authorities reported that more than 20,000 people crossed the Georgian border in a single day last week - the highest figure on record. Notably though, Georgia’s Interior Ministry has rejected those figures.

Tyler Durden Mon, 08/24/2026 - 08:35

Futures Slide Ahead Of "Pivotal Week" With Nvidia Earnings. Warsh Speech On Deck

Futures are lower with Tech underperforming as the market focuses on NVDA / MRVL earnings this week; while the AI theme is pressured globally and memory stocks slump driven by a slide in the Kospi. Futures got a boost just after 7am when CNBC reported that the Treasury could use the General Account ($935BN as of today) to fund bond buybacks. As of 8:00am ET, S&P futures are down 0.2%, rising from a session low hit this morning around -0.4%. Nasdaq futures are down 0.4% with Mag7 names mixed and Software up. In premarket trading, Memory/Semis are weaker, dragging down the Tech tape. Defensives are leading Cyclicals ex-Materials as Metals/Miners look to extend their bullish run. European stocks are lower, dragged down by tech while\South Korea’s Kospi was once again Asia's top loser, sliding 3.1%. Shares of SK Hynix also lost more than 3%. Bond yields are lower, down 3-4bp as the curve shifts lower and USD is bid with the Dollar stronger versus G7. In commodities, oil and ags are pulling the group lower on reports of more than 15mm bbl leaving SoH over the weekend; gold / base are bid as silver sells off as part of AI weakness. Warsh’s speech Friday at 10am is the macro focus for the week but we also get updates on PCE, which has been de-risked with the CPI/PPI prints, income / spending, housing data, and some regional Fed activity indicators. US session has few scheduled events Monday; ahead this week are coupon auctions, July personal income and spending data including PCE price indexes, and Federal Reserve Chairman Kevin Warsh speech at Jackson Hole Symposium.

In premarket trading, Mag 7 stocks are mixed (Alphabet -0.3%, Amazon +0.3%, Apple +0.4%, Meta +0.2%, Microsoft unchanged, Nvidia -0.2%, Tesla -0.3)

• Watch US and Canadian metals, lumber, dairy, automotive and equipment maker stocks as Canada is set to apply counter-tariffs on $20 billion of US products on Sept. 8 after the US implemented a new 50% tax on imports of hundreds of Canadian items.
• Alibaba ADRs (BABA) fall 2% after raising $10.2 billion in Hong Kong’s biggest follow-on offering, underscoring its willingness to amass and spend vast sums to take the lead in global artificial intelligence.
• Applied Optoelectronics (AAOI) tumbles 12% after the company filed for a possible offering of shares.
• NVent Electric (NVT) slips 1% the maker of cabinets and racks for data centers agreed to buy Maverick Power for $1.75 billion.
• PDD Holdings ADRs (PDD) rise 2% after the owner of Temu reported second quarter earnings that beat the average analyst estimate.
• Regenxbio (RGNX) tumbles 25% after the drug developer said the FDA placed a clinical hold on its investigational gene therapy RGX-121 for Hunter Syndrome. The hold follows the discovery of either a small nodules or a cystic mass in spine MRIs of five trial participants.

In other corporate news,  Alibaba raised HK$80 billion ($10.2 billion) in Hong Kong’s biggest secondary share sale, underscoring its willingness to amass and spend vast sums to take the lead in global AI. Nvidia is discussing investing in Perplexity in an equity round valuing the AI startup at more than $30 billion, The Information reported. QXO, the building products conglomerate founded and led by billionaire Brad Jacobs, is hiring a onetime contender for the top job at Honeywell International.

Brent snapped a six-day run of gains, falling to around $93 a barrel as traders waited for details of Treasury Secretary Scott Bessent’s plan to economically isolate Iran. Treasury yields declined, with the longer end extending the move after CNBC reported Bessent could tap the near-$1 trillion Treasury General Account to fund bond buybacks. The greenback firmed, while the Canadian dollar was the worst-performing major currency after the country rejected a US tariff deal.

Traders are prepping for Fed Chair Kevin Warsh to speak at Jackson Hole on Friday, an event that takes on added significance after concerns over ballooning budget deficits and persistent inflation sent long-dated yields to multi-decade highs. The yield surge has already prompted an intervention by Bessent, who also pledged measures to shore up US finances. Meanwhile, Wednesday’s release of the Fed’s preferred inflation gauge will shape expectations for near-term interest-rate decisions after some officials recently reaffirmed concerns about stubborn price pressures. AI bellwether Nvidia Corp. is scheduled to report earnings the same day.

“This is set to be a pivotal week for asset markets, since there is still a chance the US Treasury selloff becomes a full-blown crisis,” wrote Kathleen Brooks, research director at XTB.

Bessent “is highly likely to underwhelm” given the scale of fiscal consolidation needed, said Emma Moriarty at CG Asset Management. Traders are unsure what to expect from Warsh given his reluctance to issue guidance and the view that Bessent’s intervention encroached on the Fed chief’s remit, she said.

Besides the Fed, we also have the most important AI company reporting earnings on Wednesday. For Nvidia, options markets are pricing in a 4.6% move following its results. The firm is not only a key pillar of the global buildout of artificial intelligence but is also increasingly orchestrating funding for AI projects. 

“Nvidia is now so powerful and cash-rich that it is almost like a central bank to the tech industry,” Brooks noted.

Elsewhere, as we reported on Sunday, clients of Goldman Sachs’ Prime Services desk net sold global equities in the week through Thursday for the first time in a month and at the fastest pace in two months, a -2.3 standard deviation move against the past year.

The relentless rise of the momentum factor had been a core tenant of factor investing, but a rapid unwind has pressured the strategy, Bloomberg warns. If this continues, value investing may come back into vogue, index rebalancing trades could become difficult and retail traders might need to slow down. In an astonishing change of fortunes, the tortoise pulls ahead of the hare, with the equal weighted S&P 500 Index outperforming momentum over the last year.

The absence of a spot-up/vol-up dynamic in chips may have two causes, according to Liquidnet Alpha cross-asset sales specialist Anthony Benichou. TMT hedge funds badly bruised in July are unlikely to redeploy leverage with the same aggression and momentum has broadened elsewhere, particularly into gold, gold miners and Bitcoin, which is “competing for marginal capital,” writes Benichou.

But while stock volatility takes a breather, bond traders are getting more than their share. Bessent’s bold intervention to stem a rise in yields last week has yet to pay off and could confuse the signal that markets send to the Fed. As noted earlier, investors are looking for Warsh to clarify his views on how the US central bank should react to stubborn inflation when he speaks on Friday at the annual gathering in Jackson Hole, Wyoming.

Credit spreads of hyperscalers also underscore growing costs for the AI buildout. JPMorgan strategists including Bram Kaplan note that on several AI-linked names, the left-tail of the implied volatility surface has “repriced lower even as CDS has moved wider.” That’s as prices of servers with Nvidia chips could be set for a 15% hike. Junk bond “tourists” are adding to the volatile mix as they wade into the financing splurge on data center projects.

In other assets, Pimco continues to view bonds as attractive and “would look to add if yields continue to rise, given the opportunity higher yields present for income, carry, and rolling down a steeper yield curve.”

Tech names have underperformed in Europe too where the Stoxx 600 is little changed with the macro outlook back in focus as traders looked to data for clues about the health of the region’s economy. Here are the biggest movers Monday:

• European steel firm SSAB and aluminum supplier Norsk Hydro traded higher after the US and Canada failed to agree on a tariff deal, which analysts say leaves the status-quo intact and is positive for the two companies
• Trainline gained as much as 2.8%, rising for a second session, as Shore Capital says the recent stock weakness due to the UK competition watchdog’s investigation is “overdone”
• Siegfried shares fell as much as 8.3%, erasing gains made after earnings on Friday, as analysts lowered their estimates
• BW Offshore fell as much as 16%, the most since March 2020, after the Norwegian offshore services firm cut its full-year guidance for Ebitda

Asian stocks fell at the start of what’s set to be the busiest week for earnings this reporting season, dragged down by losses in some tech heavyweights. The MSCI Asia Pacific Index dropped as much as 1.2%. Samsung’s shares tumbled nearly 9% as investors were underwhelmed by its plans to return as much as 110 trillion won ($80 billion) to shareholders this year. Alibaba’s stock plunged 8.5% after it raised HK$80 billion ($10.2 billion) in Hong Kong’s biggest secondary offering, selling shares at a discount. That spurred a broader selloff in Chinese tech stocks. About 370 of the MSCI Asia Pacific Index’s more than 1,200 constituents are due to report results this week, putting the durability of the AI rally and China’s consumption recovery in focus. Globally, Nvidia’s results and Federal Reserve Chair Kevin Warsh’s commentary at the annual gathering in Jackson Hole, Wyoming are the two major events this week. South Korea’s Kospi was once again the region’s top loser, sliding 3.1%. Shares of SK Hynix also lost more than 3%. Vietnam’s stock benchmark was the leading gainer after securing a bigger-than-expected weighting in FTSE Russell’s semi-annual index review.

In FX, the Bloomberg Dollar Spot Index rises 0.2%. The Canadian dollar is the weakest of the G-10 currencies, falling 0.6% against the greenback after Canada announced counter-tariffs on the US.

In rates, treasuries advance, pulling US 10-year borrowing costs down 2 bps to 4.71% with oil prices lower ahead of the expected release of a US economic isolation plan for Iran. Yields are lower by as much as 2bp with curve flatter; Friday’s selloff lifted 2-year yields by nearly 5bp to first close above 50-day average level in more than a week, where it remained near 4.24%. Treasury coupon auction cycle begins Tuesday with $69 billion 2-year note; $70 billion 5-year and $44 billion seven year follow over next two days. IG credit new-issue calendar is anticipated to be light through month-end. US session has few scheduled events Monday; ahead this week are coupon auctions, July personal income and spending data including PCE price indexes, and Federal Reserve Chairman Kevin Warsh speech at Jackson Hole Symposium.

In commodities, Brent crude futures fall 1.5% to around $93 a barrel and that has likely limited any downside in European equities. It’s helped bonds too with UK and German 10-year yields down 1 bp each. Gold headed for $4,650 an ounce. Bitcoin edged past $78,000.

US economic data calendar includes only July Chicago Fed National Activity Index at 8:30 a.m. New York time. Fed speaker slate is blank for Monday; ahead of Warsh’s address at Jackson Hole Symposium Friday, the only scheduled appearances are three by Richmond Fed’s Tom Barkin over Aug. 25-26

Market Snapshot

Top Overnight News

• Iran has granted permission for a number of Iraqi oil tankers to pass through the ‌Strait of Hormuz following repeated requests from Baghdad through various channels, Iran’s state news agency IRNA reported on Saturday. IRNA said obtaining special permission for Iraqi tankers was one of Baghdad’s main requests during Iranian ⁠parliament speaker Mohammad Baqer Qalibaf’s visit to Iraq. RTRS
• Saudi Arabia has held talks with London brokers about a state-backed scheme for war and political risk insurance that could provide cover for ships in the region, according to people familiar with discussions, as conflict threatens the kingdom’s trade. FT
• Scott Bessent’s set to announce details of the US effort to economically isolate Iran later today. Tehran threatened to halt all crude exports through the Strait of Hormuz and Persian Gulf if the US campaign continues. BBG
• Trade talks between the U.S. and Canada broke down on Friday, officials from both countries said, paving the way for the U.S. to impose 50% tariffs on about $20 billion worth of Canadian goods early on Saturday and risking escalation into an all-out trade war. WSJ
• US President Trump said in a pre-taped interview on 77 WABC that communities not taking data centres are making mistakes and that data centres provide tremendous amount of jobs and money. said:. Chinese President Xi comes to the White House, we'll be using the East Room.
• Softbank plans to issue a record volume of retail bonds to partly fund its expanding artificial intelligence investments, as the company deepens its multibillion-dollar commitments to OpenAI and related infrastructure projects. WSJ
• Some of Nvidia’s biggest clients have been told AI server prices will rise more than 15%, people familiar said. The hikes will go into effect on systems shipped early next year. BBG
• Perplexity is in talks to raise money at a ~$30B valuation (up ~50% from its last finding round a year ago), and Nvidia could participate. The Information
• China’s $387 billion quant hedge-fund sector is rebounding from its steep July rout, with the most popular strategies outperforming benchmarks. BBG
• Demand for debasement hedges is increasingly finding its way into Bitcoin, with US ETFs for the digital currency recording $1.9 billion of net inflows last week, the strongest haul since October 2025.
• Mutual funds and hedge funds each carry equity market exposures that are elevated relative to the last few years but below recent peaks. Hedge fund returns, leverage, and crowding all surged in Q2, but July witnessed one of the sharpest deleveraging episodes of the past decade. GS Prime Services estimates now show hedge funds carrying net and gross leverage that rank below 12-month averages but remain elevated relative to the last few years. Similarly, mutual fund cash balances register 1.2% of assets, above the record low of 1.1% reached in December 2025 but otherwise one of the lowest levels on record. Goldman

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed, albeit with a mostly negative bias amid a US-Canada trade war and following quiet geopolitical headlines over the weekend, while participants await this week's key events, including the US announcing the 'toughest sanctions in history' against Iran later, in what is described as economic D-Day, NVIDIA earnings due mid-week and the Jackson Hole Symposium on August 27th-29th. ASX 200 was higher amid strength in the mining, materials, resources and tech sectors, while participants digested another deluge of earnings releases from Australian companies. Nikkei 225 was choppy and traded on both sides of the 66,000 level amid strength in the heavy industries, while tech-related stocks lagged with Kioxia and SoftBank among the worst hit. KOSPI underperformed amid weakness in its tech giants, with Samsung Electronics and affiliates suffering heavy losses despite the recent announcement of its largest-ever shareholder return plan. Hang Seng and Shanghai Comp were pressured amid selling in tech, with Alibaba suffering heavily after it announced a USD 10bln Hong Kong share sale, while 'Big Short's' Michael Burry said he sold his Alibaba shares to build a large position in JD.com (9618 HK) and suggested Alibaba was overvalued.

Top Asian News

• South Korean President Lee is said to be expected to meet Samsung Electronics (005930 KS) Chairman this week for possible talks on major semiconductor and AI investment projects, Yonhap sources say.
• SoftBank (9984 JT) plans a JPY 1tln retail bond sale, according to Bloomberg.
• Shein offers HK IPO shares at HKD 47.60-49.50/shr with total number of shares at 280mln Class B shares, while total number of shares under global offering is 252mln Class B shares. Hong Kong public offering period will begin at 09:00 am local time on August 24th and end at 12:00 noon on August 27th. Final offer price will be announced no later than 23:00 pm on August 31st.

European bourses (STOXX 600 +0.1%) kicked off the trading week on the backfoot. However, as the morning progressed sentiment has picked up off worst levels to currently trade with a slight positive bias. European sectors hold a slight positive bias. Basic Resources leads, buoyed by gains in underlying metals prices; Travel & Leisure benefits from lower energy prices and Media completes the top three. Autos reside at the top of the pile, joined closely by Healthcare and Tech. Key movers: Evolution (+1%) rejects Candle Lake’s SEK 695/shr offer, saying it does not reflect fair market value. Shell (-0.2%) fairs a touch better vs peers (BP/TotalEnergies -0.9%). Focus has been on an FT sources piece, which noted that Shell draws interest from bidders for its USD 8bln US chemicals assets. However, the piece highlighted that the USD 8bln valuation would be a "steep discount" to the amount that Shell had invested in its US chemicals facilities

Top European News

• French Economy Minister Lescure said it is not easy to cut taxes on large companies.

FX

• USD is firmer against all G10 peers to varying degrees, with moves vs CAD most pronounced after trade updates. DXY is at session highs just above 99.00 after breaking out of 98.90 resistance, the next level is the 200DMA @ 99.17.
• A lot of focus on USD “debasement” after alternative assets BTC and Gold outperformed last week, the market today is clawing back some of these losses with DXY edging higher and BTC off Friday's highs, however gold is firmer, potentially signalling a haven bid with global equities mostly weaker. In terms of developments over the weekend, Bessent wrote a hawkish FT piece, while Iran returned the language noting "not a single drop of oil" would leave the Persian Gulf. On that note, we expect Bessent to explain the latest sanctions in a presser this evening. Oil is not convinced by these developments with Brent down ~1%. A busy week ahead sees PCE, GDP, and Nvidia earnings hit Wednesday; Jackson Hole and US supply data land Thursday. Friday brings the NFP Annual Revision Prelim and remarks from Fed Chair Warsh. While we do not have a specific time yet, Bessent could also announce “increased focus on fiscal consolidation”; which most desks have been sceptical on over the past week.
• CAD is the clear G10 underperformer after the unexpected breakdown of trade negotiations between the US and Canada, with the latter imposing dollar-for-dollar 50% tariffs on US goods. To remind, the updates we had on Friday said that their respective trade officials would meet in Washington to finalise the deal. USD/CAD looks to return to the 200DMA which it fell beneath on Wednesday, however a renewed trade war could lead to some USD weakness. MUFG reckons the CAD sell-off does not have legs, noting it targets just 5% of Canada’s exports.
• Action elsewhere is quiet, Antipodeans are lower amid the risk tone, AUD/NZD +0.1%, supported at 1.20, Scandis are also weaker with NOK suffering from the dull tone and weaker oil prices, while EUR/USD and GBP/USD are a touch weaker against the Buck around 1.1660 and 1.3630 respectively.
• PBoC injected CNY 340bln via 7-day reverse repos with the rate maintained at 1.40%.

Fixed Income

• A modestly firmer start to the week for fixed income. Today, the docket is dominated by US Treasury Secretary Bessent on Iran at 19:00BST, a speech followed by a Q&A which will likely feature questions on last week’s long-end intervention.
• As it stands, USTs are at the upper-end of 108-08+ to 108-15 parameters. Despite the action taken to essentially pullback long-end yields last Wednesday, USTs themselves are towards the lower-end of that week’s 108-07+ to 108-30 parameters. Given this, Bessent may give commentary to verbally support the action taken.
• Note, the week also features the BLS preliminary benchmark revision, where any downward revision could knock the Fed from its assessment around the labour market; at the July FOMC, Chair Warsh described it as “solid”, “steady” and “more or less at equilibrium”, commentary that underscored the near-term focus on inflation over jobs. An update is also due from Warsh at Jackson Hole on Friday. However, given his distaste for forward guidance, it remains to be seen whether he will materially update on the economy and/or monetary situation.
• From a yield perspective, the US 10yr is holding around 4.71%, in the upper half of last week’s 4.63-4.75% band. For the 30yr, the same picture, currently around 5.25% vs 5.17-5.34% from last week.
• EGBs also bid, but only modestly. Europe is partaking in the Coalition of the Willing meeting in Kyiv, though the French and German leaders are remote due to a Saudi Arabia meeting and domestic political matters, respectively. Currently, Bunds are firmer by around 10 ticks and holding just below the 124.00 handle, toward the mid-point of last week’s 123.60 to 124.44 parameters.
• Gilts in-fitting, UK specifics light as the focus is on Ukraine and, more pertinently, the above US events. Note, the UK is set to pledge missile support to Ukraine, the financial details of which could be pertinent to the benchmark. As above, Gilts are firmer by about 10 ticks in c. 30 tick parameters, within last week’s 85.81 to 86.73 band.
• Caterpillar (CAT) files to sell EUR denominated 2yr FRN and 3yr noted. 2yr FRN guidance seen +55-60bps to 3m Euribor. 3yr noted seen MS +65bps.
• Japan sold JPY 250bln in 10yr Climate Transition Bonds b/c 3.51 (Prev. 3.42). Price at the highest accepted yield 99.46 (prev. 99.17). Highest accepted yield 2.863% (Prev. 2.195%).

Commodities

• The weekend lacked any major updates. Focus is on US Treasury Secretary Bessent’s update later today at 14:00 EDT (19:00 BST). Market focus will be on the promised escalation of sanctions against Iran and further details regarding last week’s Treasury action at the long end. On Iran, focus will be on secondary sanctions, possible action against major Chinese entities and any retaliation through the Strait of Hormuz. Tehran has threatened to prevent oil exports from leaving the Persian Gulf if the pressure continues (Full preview available at 07:40 BST on the Newsquawk feed). Notable updates today include separate visits by the Omani foreign minister and Pakistani army chief to Tehran, with the latter reportedly speaking to US President Trump before his visit to Iran. Further, UKMTO reported an incident near Yanbu, Saudi Arabia, which prompted modest upticks in crude. As a reminder, the Yemeni Houthis recently expanded their "blockade-for-blockade" policy against Saudi Arabia to the northern Red Sea.
• WTI Oct and Brent Nov futures remain softer but off lows, with the former within USD 84.69-86.57/bbl (vs Friday’s 85.80-87.51/bbl range) and the latter towards the middle of a USD 90.30-92.06/bbl range (vs Friday’s 91.15-92.98/bbl range). Dutch TTF bucks the trend and trades firmer by ~1% intraday at the time of writing, buoyed by European storage replenishment ahead of winter, with the front-month contract trading on either side of EUR 66/MWh.
• Precious metals are mixed whilst DXY remains firmer following its recent selloff, and notwithstanding lower energy prices and yields today. Spot gold is higher in tandem with the Buck and bonds, which could potentially suggest some haven positioning ahead of this week’s risk events and the aforementioned Bessent announcement at 19:00 BST, with the yellow metal currently in a USD 4,594-4,660/oz range. Spot silver is flat/slow but found support this morning at its 100 DMA (USD 68.41/oz) but remains within Friday’s USD 67.91-70.02/oz range.
• Base metals are similarly mixed and relatively resilient to the firmer Buck, with the complex continuing to be underpinned by hopes of Chinese stimulus following a recent string of disappointing Chinese data, in turn triggering widespread market expectation that Beijing will have to deploy aggressive stimulus to meet its annual targets. 3M LME copper resides towards the upper end of a narrow USD 14,141.60- 14,279.78/t range.
• Sinopec (600028 CH) executive said it is very likely that China oil demand peaked last year.
• An unusual fire alert was detected near Iraq’s Kirkuk oil field (450k BPD) with an intense thermal anomaly recorded 21 km away at 07:18 UTC.
• Norway said it will proceed with development of its Barents Sea oil and gas reserves, regardless of the EU's proposed Arctic drilling moratorium.
• Thailand's Finance Ministry considers taxing gold transactions in which it will consider a tax on gold trade and gold imports, while it will discuss tax with the Gold Association this week. said:. - Gold tax is aimed at curbing illicit funds and there is no plan for a high gold tax.

Trade/Tariffs

• Trade discussions between the US and Canada collapsed on Friday partly due to a last-minute stand-off regarding cutting US tariffs on Canadian medium and heavy-duty vehicles, according to people familiar with the matter cited by Bloomberg. This means the 50% US tariffs on some Canadian goods have taken effect, while Canadian PM Carney vowed to retaliate by matching tariffs dollar for dollar on US goods from September 8th.
• Canadian PM Carney said Canada was in a trade war with the US and that President Trump "miscalculated" by escalating his tariff attack, according to FT.
• US Transportation Secretary Duffy said Canadian PM Carney is going to “come to the table” on trade because tariffs will be “devastating”, while he suggested Canada is foolish to think it could win a trade war with US President Trump.
• Canada sees a long trade war with the US that could last beyond the Midterms.

Central Banks

• Fed’s Kashkari (2026 voter, hawkish dissenter) said the Treasury market is functioning as it should and that the recent surge is unlikely to impact monetary policy deliberations.
• ECB's Cipollone said that monetary policy needs to be well calibrated; inflation is far from adverse & severe scenarios. No signs pointing to a scenario of stagflation.
• SNB Sight Deposits w/e Aug 21st (CHF): Domestic 437.11bln (prev. 433.52bln), Total 462.66bln (prev. 458.75bln).

Geopolitics: Middle East

• US Treasury Secretary Bessent writes in FT that economic D-Day is coming for Iran, and countries that calculate appeasement of the regime to be a safer choice should reconsider. said:. "At dawn begins an economic D-Day — the single greatest financial offensive ever marshalled against an adversary.". "Those who sever Iran’s remaining financial and commercial connectivity will reinvigorate their own. They will deepen their access to global capital, reinforce confidence in their markets and attain the standing they seek in the world economy.". "The alternative for those who tether themselves to Tehran is the foreclosure of any path to lasting prosperity...And any nation that serves as a financial artery of a withering regime should expect to share in its isolation."
• US President Trump said on Friday that Washington was observing what happens in the conflict with Iran, and he reiterated a warning against any country that provides a lifeline to Iran, while he said Iran would love to make a deal but isn’t ready to make the right deal in his opinion.
• UKMTO has received a report of an incident 63NM west of Yanbu, Saudi Arabia; tanker was struck by an unknown projectile.
• Pakistan's Army Chef Munir spoke with US President Trump ahead of his visit to Tehran, according to Pakistani sources.
• The Pakistan Army Chief Field Marshal Syed Asim Munir left Islamabad for Tehran a few minutes ago to meet with high-ranking officials of Iran, ISNA reported citing sources.
• Iranian Foreign Ministry Spokesperson Baghaei criticised a looming US announcement of sanctions on Iran, which he said was an assertion of extraterritorial sovereignty over independent member states of the UN and that such secondary sanctions have no foundation in international law.
• Iranian Parliamentary Speaker Ghalibaf said they have received messages from neighbours about forming new security arrangements and economic cooperation, while he also stated that the US has put its allies at such risk through bullying and pure disregard of their interests for the sake of Israel that they briefly saw their entire existence on the line.
• Iran’s Foreign Ministry said the security of the Strait of Hormuz will be discussed during the Omani foreign minister’s visit, Al Arabiya reported. Adds, they would strike at any source of aggression.
• Iran’s Persian Gulf Strait Authority said vessels violating Iran’s rules for passage through the Strait of Hormuz could face fines, detention, or confiscation.
• Iran's Foreign Ministry spokesperson said Oman's Foreign Minister will visit Tehran on Tuesday as part of ongoing consultations regarding maritime security and freedom of navigation in the Strait of Hormuz.
• Iran's Foreign Minister Araghchi noted in Etelaat newspaper regarding new perspective on the horizon of Iran-China strategic partnership, stating they have been friends in difficult times and have many capabilities to strengthen friendship and cooperation.
• Iran's Persian Gulf Strait Authority issues new rules for ships transiting through the Strait of Hormuz and warns vessels that violate Iranian protocols could face restrictions on subsequent voyages, including fines, detention or seizure. Cargo owners are being told to check Iran's non-compliant vessels list before chartering ships, while any vessel conducting ship-to-ship transfers or other transactions with a blacklisted vessel will itself be added to the list.
• Iranian Foreign Ministry spokesperson Baghaei said the Omani foreign minister’s visit to Tehran is not linked to the Pakistani army chief’s visit.
• Yemen’s armed forces launched several missiles toward Saudi Arabia, while a powerful explosion was heard at a headquarters of Saudi-linked militias in the southern Yemeni city of Aden, ISNA reported.
• Israel conducts an airstrike on the central Gaza Strip, according to Al Arabiya.
• Shipping data showed fewer than 20 commodity vessels transited the Strait of Hormuz over the weekend.

Geopolitics: Middle East

• US administration officials, including Witkoff and Kushner, are now no longer expected in Ukraine, Politico reported.
• Russia said its forces struck a tanker carrying fuel near Ukraine's Odessa.
• UK PM Burnham arrived in Kyiv, Ukraine on Monday morning.
• South Korea said that North Korea is preparing further Russia troop deployments, although no sign of an imminent move.
• Russia repels a drone attack on an industrial zone of Nevinnomyssk in southern Stavropol region, according to the governor.

US Event Calendar

• 8:30 am: Jul Chicago Fed Nat Activity Index, est. -0.05, prior -0.02

DB's Jim Reid concludes the overnight wrap

As we go to press this morning, the upward pressure on long-end bond yields from last week has shown initial signs of easing. Indeed, the 30yr Treasury yield is down -2.4bps overnight to 5.25%, whilst the 10yr yield is down by the same amount to 4.71%. That’s been supported by a pullback in oil prices, with Brent crude oil (-1.37%) finally reversing course after a run of 6 consecutive gains to trade at $93.10/bbl. But even as there’s been some relief on the rates and inflation side overnight, the negative momentum in equities has continued, with S&P 500 futures down another -0.10% after the index fell -1.43% last week. Meanwhile in Asia this morning, there’s also been a decent pullback across the board, including declines for the KOSPI (-3.15%), the Hang Seng (-2.09%), the CSI 300 (-1.26%), Shanghai Comp (-0.71%) and the Nikkei (-0.52%). 

That pullback in Treasury yields this morning follows last week’s surprise announcement that the US Treasury will increase its buyback operations for longer-dated Treasuries. That briefly eased the pressure on yields when it was announced, with the 30yr yield down -9.2bps on Wednesday to 5.19%, after reaching a post-2007 high of 5.31% last Monday. But even with that intervention, yields then crept back up into the weekend, with the 30yr yield closing at 5.27% on Friday, less than 4bps beneath its closing peak earlier in the week. Moreover, investor concern about wider financial repression led to clear effects in other asset classes, with the dollar index down -0.87% last week, whilst gold rose +5.18%. And this morning, gold is up another +0.72% to a 3-month high of $4,636/oz. 

One reason why yields moved higher into the weekend was the ongoing rise in oil prices last week, which added to fears about inflation. Indeed, if we look at the oil futures curve, it’s clear that markets are starting to price in a longer closure of the Strait of Hormuz again. For instance, the 12-month Brent future hit a 2-month high of $79.16/bbl on Friday, which isn’t far off its peak in the Iran conflict of $83.58/bbl back in May. So those expectations of higher oil prices put upward pressure on yields as well, and the weekend newsflow hasn’t shown any sign of progress towards a US-Iran deal either. 

The conflict is set to stay in the headlines this week, as US Treasury Secretary Bessent has said that he’ll be holding a press conference today to outline what he described as “the greatest coordinated economic isolation in the history of the world”. That follows President Trump’s post last week that “ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences.” Bessent also wrote an article in the FT overnight, in which he referred to an “economic D-Day”.

Elsewhere, tariffs were also back in the headlines over the weekend, after the trade talks between the US and Canada broke down. Canadian PM Mark Carney said they were “walking away from a bad deal”, and would now “match Washington’s new tariffs dollar for dollar”. So that means Canada will now face 50% tariffs on around $20bn worth of goods, and Carney said that their own retaliatory tariffs would take effect on September 8. Meanwhile on the US side, President Trump posted that “Canada wants the benefits of being a State, without being one!!! They have also charged our great farmers, for many years, massive amounts of Tariffs. No more!!!” There’s already been a market reaction this morning to the breakdown of the talks, with the Canadian dollar weakening against every other G10 currency, including a -0.26% fall against the US Dollar. Otherwise, Bloomberg also reported overnight that Canada saw little chance of the talks resuming before the midterm elections. 

Looking forward, the week ahead has several other events, with a big one set to be Fed Chair Warsh’s speech at Jackson Hole on Friday. This is a speech that’s often used by Fed Chairs to make big announcements or send policy signals, and last year saw former Chair Powell acknowledge that policy might need adjusting, shortly before they cut rates again the following month. We’ll have to see what Warsh discusses this time, but he said at the July press conference that he hadn’t yet decided “whether it’s going to be a big-picture speech or whether it’s going to be a more traditional set up for all the action we’re going to have between September and December”.

Our US economists have a preview of the event (link here), and their view is that if Warsh goes for the “big-picture” speech, then his options include a discussion of the Fed’s taskforces he set up, or possibly a speech on AI’s impact on the economy and his thinking. Alternatively, if he goes for the “more traditional” speech, they think Warsh could do a “cleanup” of the July press conference, and he may wish to counter one market narrative that Fed policy actions could be delayed until the task forces have completed their work. Otherwise, he might also discuss how officials are viewing inflation dynamics, or how the FOMC views the monetary policy implications of evolving financial conditions and recent volatility in long-term interest rates. But whatever he decides, market pricing is still very much in the balance for the next meeting in 3 weeks’ time, with futures currently pricing in a 39% chance of a hike. So investors are keeping an eye out for anything that could shift this in either direction.

Elsewhere this week, earnings season is winding down, but we do have a few releases left including Nvidia on Wednesday. In the last few years, Nvidia’s earnings have often been a big macro event in their own right, with reactions on a par with US jobs reports and CPI prints. But in the most recent quarters, the positive earnings surprises haven’t been as big as we saw in 2023-24, and after each of the last 4 earnings reports, Nvidia’s share price actually fell the next day. Speaking of Nvidia, Bloomberg also reported over the weekend that some of their biggest customers had been told about price hikes for servers containing its AI chips. So that adds to the signs that AI is having inflationary consequences, and isn’t a straightforward positive supply shock. 

Otherwise, the data calendar is fairly light next week, with a few inflation reports likely to be the main focus. That includes the US PCE reading for July on Wednesday, which is the Fed’s target measure, for which our US economists expect core PCE at a monthly 0.18%. Then in Europe, we’ll start to get some of the flash CPI prints for August, including from France and Spain on Friday, ahead of the Euro Area-wide number next week. 

Recapping last week now, it was generally a rough week for markets, as the lack of any US-Iran talks meant that oil prices kept moving higher, leading to fresh concerns about inflation. So that meant Brent crude rose +6.63% last week to $94.39/bbl. And in turn, the US 1yr inflation swap rose +34.5bps to 2.24%, its biggest weekly jump since March, whilst the 1yr Euro inflation swap rose +25bps to 2.71%. 
That backdrop kept up the pressure on sovereign bonds, with the 10yr Treasury yield up +4.2bps to 4.73%, whilst the 10yr bund yield was up +5.4bps to 3.26%. Admittedly, there was a bit of a rally after the Treasury buyback announcement, but that began to unwind into the weekend. Moreover, there was a bit more of a risk-on tone on Friday after the flash PMIs for August were generally better than expected. For instance, the Eurozone composite PMI moved up to a 9-month high of 52.1 (vs. 51.7 expected), whilst the US composite PMI moved up to a 4-year high of 56.0 (vs. 54.0 expected). 

That backdrop helped equities to recover into the weekend, but it wasn’t enough to outweigh the losses from earlier in the week. So ultimately, the S&P 500 (-1.43%), the STOXX 600 (-0.56%) and the Nikkei (-3.93%) were all down on the week. And that weakness in risk assets was also clear in US credit, where IG (+1bp) and HY (+3bps) spreads both widened last week. However, the performance in Euro credit was more subdued, with both IG and HY spreads unchanged over the week. 

Tyler Durden Mon, 08/24/2026 - 08:25

Gold Jumps, Curve Flattens On Report Treasury To Tap Trillion-Dollar TGA To Fund Bond Buybacks

Having seen yields rebound from their initial decline following the upping of Treasury (long-end) buybacks to 'at least $4BN' per operation (and increased its total planned operations), Treasury Secretary Scott Bessent jawboned late last week about his 'bigger toolkit' and 'asymmetric information' in an attempt to further strengthen the 'Treasury Put'.

Unfortunately for him, the market (vigilant as ever), decided to test him with yields ending the week at the highs.

So this morning, two senior Treasury officials told CNBC that Treasury could use its near $1 trillion General Account (TGA) to help fund the bond buybacks.

Using the TGA would provide the Treasury with considerable firepower to influence long-term bond yields and reassure the market of its ability to influence rates (since last week's announcement made no mention of how it would fund the purchases).

As CNBC notes, most market participants assumed it would do so by selling short-term bills. The senior Treasury officials did not rule that out. Bessent in the CNBC interview called the operation a “Treasury Twist,” a reference to a government or Fed operation where long-term treasuries are bought and paid for with short-term issuance. That also implied that short-term bonds would be sold.

Using the TGA could change that perception. The TGA is essentially the government’s checking account, a rainy-day fund of sorts held at the Fed. It is already funded with existing tax collections. Bessent has built up the TGA to around $950 billion currently, compared with a stated goal under the Biden administration of around $550 to $600 billion.

Additionally, using the TGA would limit any concern, also voiced by some bond market participants, that the Fed could be asked to help the Treasury in such operations. 

The officials would not say how much, if any, of the TGA would be used or when such an announcement could be made.

The reaction was actually quite modest in bonds (short-end yields up, long-end down, flattening of the curve)...

Curve flattened...

The reaction in bonds is a little odd, given that, as Bloomberg macro strategist, Simon White, notes that the use of the TGA means this is no longer a twist operation in its purest sense.

The difference is that bills still have a duration. The reserves exchanged to buy those bills cannot be used again until the government pays back the obligation.

Actually, this is not entirely true due to repo, but the distinction is still important: buying longer-term Treasuries using the TGA is no longer strictly reserve neutral.

On balance, this adds to inflation pressures. The amounts involved are small, but if anything it means slightly higher longer-term yields, counter to the small drop we saw in them after the CNBC headline hit.

Additionally, the rise in short-term yields runs somewhat counter to expectations (less implied short-end supply required to fund the twist would suggest short-end yields would drop).

Stocks popped...

“The decision to increase long-end buybacks itself was not necessarily radical, but the timing and framing of the decision certainly were,” Lou Crandall, a senior economist at Wrightson ICAP LLC, wrote in a note Monday.

The Treasury for years has focused on assuring investors it “would not manipulate the market for its own short-term benefit,” said Crandall.

“That promise went out the window last week.”

Translation:

So Treasury can sell debt to buyback debt

Warsh will have a field day on Friday https://t.co/3q8Rxq4amJ

— zerohedge (@zerohedge) August 24, 2026

And that's why gold and bitcoin are bid too.

And likely a cleaner 'QE trade' bet than a bond-based one as Goldman warned last week the 'term premia' is here to stay.

Tyler Durden Mon, 08/24/2026 - 08:03

The Teaser Period: Why The AI Boom Is Hitting A Reset Wall

Having laid out, in July, the structural diagnosis that most of the market still refuses to confront: the AI boom is not a technology cycle. It is a credit-driven real-estate-like cycle whose financing architecture depends on the second derivative; the appropriately-named 'Groundbreaker' website has just dropped his next insightful note on what may be the trigger for the market to wake up to the ugly reality beneath the surface of the AI dream.

Trillions in signed compute commitments come due in 2027–2028. The underlying mechanics reveal how the AI boom ends, and when...

I. Past is Prologue

Nothing looked wrong in the summer of 2006. Home prices had risen for the better part of a decade. Delinquencies were near historic lows. Credit spreads were tight, the ratings held, and the securitization machine hummed. If you had asked a hundred people on a trading desk whether the American mortgage market was months from seizing, most would have laughed.

Millions of subprime borrowers were, at that moment, paying the low introductory rate on a two-year adjustable rate mortgage - the 2/28 ARM. A low fixed-rate for two years, then the rate reset to a payment 30% to 50% higher. During those first two years the loan performed beautifully: the borrower paid, the servicer collected, and the bond paid its coupon. Nothing looked wrong because the whole complex - housing, mortgages, securitization - was sitting inside the teaser period.

Every ARM reset was known, dated, and contractually inevitable from the moment of origination. Aggregate those reset schedules and you get the most damning exhibit of the era: the reset wall. Roughly a trillion dollars of adjustable-rate mortgages were contractually set to reset across 2007 and 2008 - thirty to forty billion dollars a month at the peak. Credit Suisse published the chart in March 2007. The IMF reprinted it. It circulated on every trading floor in New York and London.

The mortgage reset wall. Every teaser written in the boom became a dated liability

Few understood it. Paulson & Co. laid out the arithmetic that same month in a comment letter to the FDIC: Over 80% of recent subprime originations, it observed, were two- or three-year adjustable-rate products. The average subprime borrower’s mortgage payments already consumed roughly 40% of their gross income at the teaser rate. Almost none of them could service the reset rate out of income.

The crisis, in other words, was written in advance by the instruments themselves. The market looked at the reset wall and kept buying, because every participant believed the exit would arrive before the reset: home prices would keep appreciating and the borrower would refinance into a fresh teaser before the old one expired.

We have spent the last eighteen years describing the financial crisis as a shock - a black swan, a hundred-year flood, a tail event. It was none of those things. Every reset on that chart was contractually inevitable from the moment of origination. The defaults were not primarily caused by an exogenous macro shock, a spike in unemployment, or a recession that arrived first. They were the scheduled mathematical consequence of loans that assumed perpetual appreciation. The mortgages were built to break.

The AI boom has rebuilt this exact structure, and the market is once again underwriting the teaser.

It has a reset wall of its own - a schedule of dated, contractual, non-negotiable payment shocks - hiding inside the trillions of dollars of compute contracts signed by OpenAI and other frontier labs since 2024.

The take-or-pay compute contract - the instrument at the center of the AI build-out - has a structural feature that almost no one prices: its payments do not begin at signing. They begin at delivery. A lab signs a multi-year capacity commitment today, but the payments do not start until the data center is energized, the capacity is accepted, and the contractual ramp schedule commences - an interval set not by finance, but by construction: siting, powering, and filling a gigawatt-scale campus takes 24-to-36 months from signature - mirroring the two-to-three-year teaser of a subprime ARM.

More than $2.3 trillion of compute contracts now sit on the books of the four largest American cloud providers as remaining performance obligations and contracted backlog - signed, celebrated, capitalized into equity prices, and, critically, not yet billing.

During the teaser period, everyone wins. The seller reports backlog growth that compounds at rates no operating business has ever sustained - Oracle’s RPO grew 363% in a single fiscal year. The buyer - a frontier lab burning cash at historic rates - books no expense because the capacity does not yet exist. The market capitalizes the booked number as if it were revenue and ignores the billed number as if it were a technicality. And then, on a schedule fixed at signing, booked compute becomes billed compute. The take-or-pay clock starts. From that day forward, the frontier labs and the hyperscalers incur those costs regardless of utilization. The invoice is a function of the contract, not of demand. That is the reset.

The parallel to 2006 is exact and it explains the single most-cited absurdity of this cycle: How does OpenAI, a company with some $40 billion of run-rate revenue, sign $1.4 trillion of compute commitments? The same way a household with $60,000 of income signed a $600,000 mortgage: because the terms at signing do not require the payment yet, and because everyone at the table - borrower, lender, and the market - believes the growth will arrive before the payment does.

The 2/28 borrower’s defense was always the same: by the time the reset arrives, my house will be worth more and I will refinance. The frontier lab’s defense is structurally identical: by the time the capacity commences, my revenue will have grown into the obligation.

The compute commencement wall can be made visible in exactly the way the reset wall was visible in 2007 - from disclosed contracts and delivery schedules. The only question is whether the market listens this time

The same chart twenty years apart. Left panel - first-reset principal balances per Credit Suisse and Inside Mortgage Finance. Right panel - announced compute commitments and contract disclosures across every frontier lab.

II. The Anatomy of a Teaser

To see why the structure behaves the way it does, I’ll break down a single contract and walk the lifecycle. The terms below are hypothetical; the architecture is the standard one visible across the disclosed OpenAI–Oracle, Anthropic–Google, Meta–CoreWeave, and OpenAI–CoreWeave arrangements.

A frontier lab signs a $12 billion, ten-year capacity commitment with a compute provider. The contract is take-or-pay, meaning the lab commits to payments once the capacity is delivered, and delivery requires a campus that does not yet exist: two years of construction, procurement, and power work stand between signature and completion.

Now look at what each party’s financial statements show during the two-year teaser.

The seller - a hyperscaler or neocloud - books the arrangement into RPO or contracted backlog on day one - the full $12 billion, disclosed, quoted, and celebrated. The market values it as contractual future revenue. Meanwhile the seller’s cash flow statement hemorrhages: the campus is being built, so capex runs far ahead of receipts. Booked backlog rises; reported earnings feel none of the buildout; financing frequently sits off-balance sheet.

The buyer - a frontier lab like OpenAI or Anthropic - announces access to the compute it needs to pursue its scaling roadmap, and its private valuation reprices on the announcement. The commitment is a future obligation, disclosed - if at all - deep in a contractual-obligations footnote or, for the private labs, nowhere public. No expense hits the P&L because no service is being received. A lab that has committed tens of billions across multiple providers carries a cost structure that reflects only its commenced capacity.

The market sees a seller with explosive backlog and a buyer with secured compute capacity, and prices both as growth stories. Nobody is lying. Every number is GAAP-clean. The structure simply guarantees that during the teaser period, the system’s reported economics and its committed economics diverge by the full value of everything signed and not yet commenced.

Every optical incentive points toward signing more.

Then comes commencement, and the two clocks converge violently. The buyer’s cash obligation steps from approximately zero to the full contractual rate, arriving not gradually but as a step function, tranche by tranche as capacity goes live. The seller begins recognizing revenue, which the market applauds, while backlog begins draining. And here is the asymmetry on which the entire thesis turns: the buyer’s obligation steps up on the construction schedule, regardless of the revenue or utilization that shows up.

The parallel is now clear: the 2/28’s teaser is the construction phase, its reset date is commencement, its fully-indexed payment is the full take-or-pay rate, and its refinance-or-sell assumption is the belief that model revenue will have grown into the obligation by the time it bills - or that another round of fundraising will cover it.

The take-or-pay compute contract is the financing innovation of this cycle the way the 2/28 was the financing innovation of the last one, and it emerged for the same reason: an asset too expensive for its natural buyer had to be made buyable. A frontier lab cannot fund a gigawatt campus out of revenue, just as a subprime borrower could not fund a house at the fully-indexed rate. In both cases the solution was an instrument that splits time in two - a cheap phase that gets the deal signed, and an expensive phase scheduled far enough out that the market ignores it.

In residential credit, the interval between origination boom and reset wall was twenty-four months, because that was the teaser’s term. In compute, the interval is the construction timeline - twenty-four to thirty-six months. The 2025–26 signing boom therefore mathematically guarantees a 2027–28 commencement boom, exactly as 2005–06 originations guaranteed 2007–08 resets.

This is what it means to say we are in the teaser period. The booked figure is enormous; the billed figure is a fraction of it and only beginning to turn up. Everything about the present looks like strength. The obligations that will govern 2027 and 2028 are already signed, already dated, and already sitting in RPO. What has not happened yet is the conversion - the moment booked becomes billed and the take-or-pay clock starts running regardless of the revenue and the counterparty’s ability to pay.

III. Take-or-Pay is Debt

The common objection to the 2008 comparison is simple: this is not 2008 because the leverage is not there.

The leverage is there. It’s simply not booked as leverage.

A take-or-pay contract is, in economic substance, a lease. And a lease is a financing. The defining feature of debt is a fixed payment on a schedule, owed regardless of the borrower’s circumstances. That is exactly what a take-or-pay commitment is. The payment does not flex with utilization. It does not wait for the customer’s revenue. It is owed on the commencement date and every period thereafter, for the term.

This is not a new concept. Rating agencies have treated take-or-pay obligations as imputed debt for more than thirty years - pipeline throughput agreements, ship-or-pay contracts in shipping and rail, long-term power purchase agreements, all routinely capitalized into leverage metrics by Moody’s and S&P. The convention simply has not been applied to compute.

Reported gross debt across the AI complex - the frontier labs, the hyperscalers, and the listed neoclouds - comes to roughly $470bn. The present value of disclosed non-cancellable compute and capacity commitments across the same set comes to roughly $1.66 trillion. The economic obligation is $2.1 trillion. For scale, subprime mortgages outstanding in March 2007 totaled roughly $1.3 trillion.

Three mechanisms keep these contracts off the reported balance sheet.

The first is disclosure asymmetry: remaining performance obligations are a seller-side disclosure under the revenue-recognition standard - the vendor tells you what it has been promised - and there is no symmetric requirement for the buyer to tell you what it has promised.

The second is that the largest buyers are private: OpenAI and Anthropic file no periodic reports, and their obligations enter the public record only when a counterparty announces a deal or books the corresponding receivable.

The third is that the contracts are generally structured as service agreements rather than leases - precisely the maneuver that kept operating leases off balance sheets before the standard changed.

The leverage objection, then, depends entirely on where you look. Look at the line marked debt, and there is relatively little of it. Look at the contractual claims on future cash, and there is more than the entire subprime mortgage market carried at its peak.

So the leverage exists. The question that follows is who owes it and whether they can pay it.

As of the second quarter of 2026, the four largest U.S. cloud providers carry roughly $2.3 trillion in contracted revenue backlog. Roughly $1.0 trillion of that total traces to two counterparties - OpenAI and Anthropic.

Both of those counterparties run deeply negative free cash flow and fund themselves through equity raises and vendor-adjacent financing from the same ecosystem whose capacity they are contracting. The single most important credit fact in the global economy right now fits in one sentence: the largest capital cycle in the history of technology is underwritten, to the tune of roughly one trillion dollars, by two private companies that do not make money.

Now contrast this with the cloud build-out of the previous decade. In the 2010s, bookings and billings tracked each other closely. Capacity was added a step ahead of demand that was already visible. Today backlog-to-revenue multiples across the complex now sit at five to six times the pre-AI software norm - with the vast majority of contracts being take-or-pay contracts signed in 2025-2026 and commencing in 2027-2028.

The multi-year commitments dominating these backlogs are underwritten not by observed demand but by a forecast of demand - a belief about how large and how soon the AI economy comes. RPO has quietly been recast from a risk disclosure into the bull case: “look at all that contracted revenue.” But a backlog is not revenue. It is a promise to pay, and it is worth exactly what the party on the other side can actually pay when the promise converts from booked to billed.

So, as the cloud era transitioned to the AI compute era:

1. Consumption on existing capacity became commitment on unbuilt capacity. The revenue-recognition lag went from one to two quarters to two to three years.

2. Variable service agreements became fixed and contractual. Pay-as-you-go, a flexible operating expense of the cloud era, became take-or-pay, a non-cancellable lease structure that the market has not fully priced as debt.

3. A diversified book became a concentrated one. The cloud-era backlog was tens of thousands of enterprise customers. Today more than half comes from two unprofitable companies.

And, 4. The collateral changed. This one will look obvious in hindsight. In the cloud era, backlog was underwritten to the customer’s operating business. A Fortune 500 firm signing a three-year cloud commitment was going to pay it out of an existing profit stream. In the compute era, backlog is underwritten to the customer’s future funding. It is not credit against cash flow. It is credit against the capital markets staying open - which is exactly the expectation of the 2/28.

“But the hyperscalers have 30%+ ROI!”

The ROI the market is capitalizing is not paid by the hyperscalers’ own operations in any self-sustaining sense. It is paid by the counterparties - by OpenAI and Anthropic and the other labs whose take-or-pay commitments are the revenue line under every one of these returns. The hyperscaler’s return on invested capital is only as real as the labs’ ability to make the payments that constitute it.

When commencement arrives, the payment that pays the ROI becomes a payment the counterparty owes regardless of its own demand. If that counterparty’s revenue has grown into the obligation, the return persists and the bulls were right. If it has not, the return does not gently compress - it inverts, because the same take-or-pay contract that was the hyperscaler’s asset is now a claim on a borrower who cannot cover it. It’s credit risk that looks like an operating return.

IV. The Signing Spree

OpenAI carries the largest compute commitments in the system against a revenue base that is a fraction of those commitments, with no parental balance sheet standing behind the obligation. It signed the most, owes the most, and burns the most, and its exit assumption - raise the next round before commencement, the way the subprime borrower’s was refinance before the reset - depends on a revenue curve inflecting on a schedule that has never been demonstrated at this scale.

Between June and December of 2025, OpenAI executed what may be the most concentrated origination spree in the history of corporate credit.

In less than twelve months, the company signed something close to $1.2 trillion in compute commitments. There was a stretch in October 2025, about three weeks, during which the company announced deals whose combined notional value exceeded the market capitalization of ninety-five percent of the companies in the S&P 500.

Signing was cheap and the re-rating was instantaneous. On the days the largest of these deals were announced, Oracle, Nvidia, AMD and Broadcom added a combined $636 billion of market capitalization.

Every dollar of that $1.2 trillion was signed during the steepest part of OpenAI’s revenue curve and underwritten to its continuation. And almost every one of these deals commences in 2027-2028. The signing spree should be read as an obligation event, not a sign of insatiable demand for compute.

V. Building the Reset Wall

Let us build the reset wall and let us build it the way Credit Suisse built the mortgage wall - in two views:

• The first is a cash question: how much does the company owe, per year, as these contracts commence? This is the equivalent of Paulson & Co’s arithmetic - which was used to compare the mortgage payments to the borrower’s income.

• The second is a concentration question: what is the total compute contract amount that resets from teaser to full pay in a single year? This is the equivalent of Credit Suisse’s 2007 reset wall - which showed the principal amounts of adjustable-rate mortgages resetting in a given year.

OpenAI’s committed annual compute cost, built bottom-up from the announced vendor contracts and reconciled to management’s own disclosed plan. The step into 2027 is the reset.

The 2007 reset wall was drawn in notional rather than annual payments - in other words, the unpaid principal balance transitioning from teaser to fully indexed. The compute equivalent is contract notional payable from the commencement date forward.

Credit Suisse could build the 2007 reset wall because securitization documents disclosed every loan’s reset date. Compute contracts are private, so the wall must be modeled - but the inputs are unusually good, because the counterparties keep announcing them publicly.

And, much like 2008, synchronized originations produces synchronized resets. Mortgage origination peaked across 2005 and 2006; the teaser was twenty-four months; the wall peaked across 2007 and 2008. Compute signing peaked across 2025 and 2026; the construction interval is twenty-four to thirty-six months; the wall peaks across 2027 and 2028. Same arithmetic, different collateral.

The mortgage-balance analogue: contract notional still payable from the commencement date forward. $712bn of it recasts to full pay across 2027–2028 for the two frontier labs alone.

Now, replicate the way Paulson & Co. measured the 2/28 borrower: compare the annual cash payment to income and determine the counterparty’s ability to meet these resets. OpenAI has no income, so in this case the comparison is against revenue. Apply four revenue paths, each anchored to the latest reported figures and to what the company itself has told investors.

Run every scenario management or the forecasters will offer - re-acceleration, the management plan, the forecaster median, a slow burn - and set each against the committed compute cost. The bottom panel is the coverage ratio: compute commitments as a share of revenue, before wages, research, sales, or tax.

Even under management’s own plan, compute alone consumes more than 200% of revenue at the 2027 peak. There is no scenario on the chart in which the frontier lab covers its compute bill out of revenue in the year the wall lands. The best case is that it grows back under the line by the end of the decade, and the best case requires the refinancing channel to stay open the entire way.

So, OpenAI’s plan for the reset is to refinance at the reset. Raise the next mega-round, at a higher valuation, to cover the obligations as they commence - exactly as the subprime borrower planned to refinance into the next loan when the teaser expired. This works while two things hold: the capital markets stay open, and the narrative stays intact.

And look at what this implies about OpenAI’s valuation as it moves toward an IPO:

OpenAI’s equity - valued north of $850 billion - is functionally the junior tranche of a capital structure whose senior claims, the take-or-pay compute obligations, exceed any revenue path management itself has articulated.

On those numbers, the equity is effectively underwater, and the market has not priced it that way because it still treats those obligations as service agreements rather than what they are economically: debt.

Even if OpenAI can meet those obligations, OpenAI’s unaudited financial statements - as of March 31, 2026 - disclose $665 billion in non-cancellable compute commitments (management’s more recent plan runs to $750 billion). These commitments are take-or-pay in structure - which, as established above, is debt.

Carry the present value of those obligations as senior debt - roughly $450–500 billion - and a company the market prices as debt-free carries a senior claim worth more than half its entire equity value.

The market is pricing the residual equity as if it were the whole stack.

VI. What the Wall Demands

The labs' answer is the 2/28 borrower's answer: revenue is compounding at triple digits, and by commencement it will cover the payment. It might. The credit point is narrower: the revenue coverage claim is a projection, while the obligation is a certainty.

The claim is not that commencement causes a lab to fail. It is that commencement is the date on which a pre-existing mismatch - fixed obligation against assumed revenue - becomes cash-due, and that, as in 2008, the mismatch is visible in the fundamentals well before the date makes it unavoidable. You do not need demand to fall. You need it only to decelerate below the rate the booked compute was underwritten to.

The compute contracts commencing in 2025 and early 2026 cleared, or very nearly cleared, the required growth rate. This is the crucial point, and it is the reason there is no alarm anywhere in the system: the early vintages worked.

They worked the way the 2005 and 2006 subprime resets worked. The collateral appreciated fast enough. The refinancing happened. Everyone who signed was vindicated, and vindication is the input to the next round of underwriting. Success in the early vintages is the mechanism that manufactures the late ones.

For committed compute merely to equal revenue in 2027 - not to be comfortably covered, simply to reach parity, before a single dollar is spent on wages, research, sales, or tax - revenue would have to compound at 217% annually off the 2025 base. The dashed line at 100% represents revenue doubling every single year and sustaining it, which no company at this scale of revenue has ever done for a multi-year stretch. The obligation is accelerating at more than double the rate of the best case for the cash flow meant to cover it.

The obligation curve is contractually fixed and steep - it ramps according to a defined construction timeline. The revenue curve is a growth rate. If the growth rate rolls over - the two curves cross. That is the reckoning: not a demand collapse, but a demand deceleration meeting a cost schedule that was set in a more optimistic year.

Deceleration alone is survivable if your cost base is variable. If demand growth slows from a 120% to 40%, a company with variable costs simply spends less, earns less, and adjusts. But a take-or-pay obligation is not variable. It is a fixed dollar amount that arrives on a fixed date regardless of what the demand curve did in the interim.

None of this means the company fails. It means the company must raise. Take the base case: roughly $375 billion of cumulative uncovered compute cost across 2026 to 2030, before research and development, before compensation, before every other operating cost of running a frontier laboratory. Round the all-in external funding requirement to the four-to-five-hundred-billion-dollar range across five years, and the exit assumption becomes explicit and testable:

The thesis for OpenAI requires capital markets to fund roughly half a trillion dollars of cumulative operating deficit at a single pre-profit counterparty, at non-punitive terms, through a window in which that counterparty’s compute costs are contractually rising faster than any plausible revenue path.

That may happen. But it should be named for what it is: a refinancing assumption rather than an operating plan, and one that depends on the collateral - the valuation - exactly in the period in which the true cash cost of the build becomes visible for the first time.

Construction timeline slippage can move the obligation - the 2027 peak flattens slightly, the 2028 peak rises, and total obligation is unchanged. The revenue that was supposed to grow into the 2027 obligation now has to grow into a larger 2028 one. This is exactly what happened when servicers pushed resets in 2007. Deferral was a repricing of when, not a cure.

OpenAI has been built as if the AI boom were a venture-backed, technology cycle; when in fact, it has the mechanics of a credit-driven real-estate cycle (as I outlined in The Second Derivative). Every decision executives have made seems to be based on maximizing a single outcome: the next round. While compute commitments are in the teaser period, they are assets - secured compute capacity signaled strength and raised the next round. OpenAI is facing a day of reckoning when those commitments are delivered and, on a schedule indifferent to their revenue or next round of funding, booked compute becomes billed compute.

And time is running out - Bridgewater’s analysis shows OpenAI is burning through their latest fundraise at an extreme pace.

VII. Anthropic and the Whole Stack

The comparison to Anthropic is useful as a controlled experiment. On the same measure, Anthropic’s compute commitments peak at close to 60% of revenue in 2027 then falls - fully covered by revenue with room left to pay operating costs. Undoubtedly stressed in the reset window, but structurally solvent and improving from the peak rather than grinding against it. Two labs, the same instrument, the same commencement window, and coverage ratios that differ by more than a factor of three at the peak.

While in a substantially better position, Anthropic is similarly the equity tranche of a capital structure heavily indebted by take-or-pay compute commitments, which the market has also failed to appropriately recognize as debt.

For sake of clarity, the revenue figures used in this analysis are annual revenue figures not a run rate.

The full system is larger, because the labs are only the top layer. Consolidated across frontier labs, hyperscalers and neoclouds, contract notional recasting peaks at $732 billion in 2027 and $820 billion in 2028. $2.4 trillion recasts from teaser to full pay across 2026 to 2029, with the two-year peak in exactly the window the frontier-lab layer identified.

System-Wide Contract Notional Recasting, Consolidated.

Now, place the full stack side by side with the mortgage reset wall.

The Reset Wall, Then and Now. The whole stack on the right, consolidated and net of eliminations.

It is worth being clear about what these charts imply:

It is not a default forecast. The reset wall did not “predict” defaults in 2008 either. It only revealed the date on which the question would be asked.

It is a statement about synchronization and about arithmetic. It says: on a schedule fixed by contracts already signed, a very large volume of fixed obligations transitions from deferred to due, in a narrow window, for a set of counterparties whose ability to pay the reset depends on a revenue number that does not yet exist - it’s a projection - and whose cash flow today is reliant upon external funding.

That is exactly what the Credit Suisse chart said in 2007. It was right, and it was ignored, and it was ignored for a reason that will be entirely familiar: at the moment it was published, every loan on it was still performing.

When skeptics raised the reset schedule in 2007, the rebuttal was performance data: delinquencies are at record lows. So they were - the vintages were two years old, home prices had risen by double-digits, and the payment being performed was the teaser payment. Today’s rebuttal has the same rationale: AI revenue is compounding at triple digits; utilization is effectively full; every GPU is oversubscribed. All true. All measured during the ramp, while capacity trails demand by construction lag and the billed payments run at a fraction of the booked compute.

VIII. The Second Teaser: Hyperscalers

The frontier labs have a contractual teaser: an obligation that is signed and not billed. The hyperscalers have an accounting one: an asset that is paid for and not expensed.

Under U.S. GAAP, capital under construction sits in “construction in progress.” Depreciation does not begin at expenditure. It begins at placement in service - when the asset is available for its intended use - regardless of whether it is being used. Construction-period interest is capitalized into the asset’s cost and expensed only after placement, through depreciation, over the asset’s life.

Then the tranche goes live, and GAAP flips the switch. Depreciation commences on the full capitalized cost - including the capitalized interest now embedded in the basis. The asset moves, in one accounting instant, from an inert balance-sheet entry to a recurring income-statement charge. In-service to the owner is what commencement is to OpenAI: a reset whose date was fixed by the construction schedule, utterly indifferent to whether demand showed up.

As tranches go live through 2027–28, depreciation inflects upward mechanically and the hyperscalers’ operating margins begin absorbing the fully indexed rate. If utilization and pricing hold, revenues rise in tandem and absorb the scheduled depreciation. If they do not, the industry will discover that depreciation is take-or-pay with the income statement as the counterparty: a fixed charge, contractually scheduled, indifferent to demand, and impossible to renegotiate.

Consider what a live datacenter owes each month whether it runs at 90% utilization or 30%. It owes depreciation, power, interest, staff, cooling, and maintenance. In a representative cost stack for a leveraged cluster, roughly 80% of the monthly cost is fixed the day the meter turns on.

This is operating leverage - a wonderful thing on the way up and a merciless one on the way down. When utilization holds, margins are spectacular, which is exactly the story the teaser period tells. But the same fixed base, spread across revenue that arrives below the underwritten level, produces negative operating leverage. There is a break-even utilization built into every one of these assets - the point below which fixed costs are not covered - and below it, the asset bleeds.

If OpenAI cannot pay, the hyperscalers do not just miss revenue - they absorb a fixed-cost shortfall that their own operating leverage magnifies. A 30% utilization drop does not mean 30% less profit. It can mean the entire facility turns unprofitable.

IX. The Options

When billing commences, unused capacity transforms overnight from strategic optionality to cash burn. A CFO staring at that line item finds ways to mitigate it.

You cannot cancel: take-or-pay is take-or-pay, senior in practice to everything. You can try to grow into the capacity, but demand is largely outside your control. Three mitigants remain: raise capital, renegotiate, or sublease.

Renegotiation is the most likely path. OpenAI’s negotiating leverage is proportional to its systemic importance - perhaps why it proposed handing a 5% equity stake to the federal government. It is too interconnected to fail; every balance sheet in the chain needs the fiction maintained. The renegotiations, when they come, will not be shown as distress. They will look like partnership: volume deferrals framed as capacity rephasing, rate cuts as efficiency-linked pricing.

But the moment one anchor lease is amended, every RPO dollar in the complex carries a demonstrated amendment probability. “Contracted” ceases to be a synonym for “certain” anywhere in the system. The $2.3 trillion only needs quiet contract negotiations to be re-rated as an asset class.

Sublease is the alternative. A tenant subleasing capacity it cannot use will take nearly any rate above zero, because every dollar recovered directly reduces cash burn. The bull case points to premium rates on today’s short-term subleases. But look at the terms: xAI’s arrangements carry ninety-day termination rights; Google frames its leases as bridge agreements; Anthropic takes spot capacity while aggressively contracting bespoke capacity elsewhere. This is bridge demand by construction. It exists only until the 2027–2028 multi-gigawatt deliveries land, at which point it hands the space back - flooding the market with shadow vacancy just as the rest of the $2.3 trillion commitments convert from booked to billed.

Compute does not need to default to break the market. It only takes a wave of quiet contract renegotiations and shadow-vacancy subleases to re-rate the asset class from a scarce strategic commodity to an oversupplied utility.

X. The Index is the Trade

When that re-rating happens, the equity of the entire complex absorbs the loss - and that equity is concentrated in the handful of names that dominate the market-capitalization-weighted indices most of the developed world owns through its retirement accounts. The ultimate holder of the risk is a household that has never heard of a take-or-pay contract.

AI-exposed names now account for roughly 45% of S&P 500 market capitalization. The ten largest companies in the index - themselves overwhelmingly AI names - sit near 40%, against about 27% for the top ten at the dot-com peak. It is the most concentrated the index has been in its modern history

Semiconductors carry roughly 19% of the index and supply roughly 45% of its total earnings growth, the largest share of any sector. That contribution is a function of the order book, and the order book is largely a function of new originations. When the reset lands and the labs spend every marginal dollar servicing commitments already commenced rather than signing new contracts, the next wave of chip orders thins. The vendors are a pure second-derivative play - they book the boom first and feel the deceleration first.

Hyperscalers are roughly another 20% of the index - and the two frontier labs are nearly half of their $2.3 trillion backlog. When the commencement wall hits, depreciation and fixed costs kick in on a schedule indifferent to whether those counterparties can pay, and the hyperscaler’s P&L becomes the backstop for any capacity the labs overbought and cannot cover. Hyperscaler ROI is fundamentally frontier lab credit risk - and the equity market hasn’t even begun to price that in.

Neoclouds are the most levered expression of the wall. CoreWeave and its peers financed gigawatt campuses on debt raised against the take-or-pay contracts themselves - backlogs many multiples of revenue, thin equity beneath, and the bulk of it commencing in 2027–28. Their model rests entirely on booked converting cleanly to billed; the capital structure has no room for a deferred or renegotiated anchor lease. They carry no index weight, but cracks in the take-or-pay complex expose them.

A passive retirement account holding an S&P 500 index fund owns a levered, concentrated bet on the conversion of contracted compute backlog into billed revenue - and on two cash-burning frontier labs’ ability to pay for it Nobody chose that allocation, and almost no one holding knows it.

XI. Living Inside the Teaser Period

The hardest thing to convey about 2006 to anyone who did not trade through it is how good the data was. Record origination, record homeownership, delinquencies scraping decade lows, homebuilder earnings at all-time highs, and every incoming statistic confirming the strength of the American consumer.

What almost no one priced was that every one of them was a teaser-phase measurement: an observation of a system whose payment test had not yet begun, generated by an instrument that mechanically guaranteed the data would look exactly this way until the schedule said otherwise.

An economy of teasers cannot produce bad credit data until the calendar turns, which means the strength of the present data carried no information about the question that mattered. The signals everyone watched were structurally incapable of carrying the signals everyone needed.

Now read the compute cycle’s tape with that in mind. Record RPO backlog, celebrated the way 2005 celebrated origination volume. Capacity sold out, demand insatiable: a construction-phase statement, necessarily true while contracted delivery lags contracted demand. Vendor revenue beating estimates, the way homebuilder earnings were the sound of the mortgage machine consuming its own vendor inputs.

This is the epistemic signature of a teaser period, and it explains the otherwise baffling social dynamics of standing inside one. The bear who cites the future reset wall is answered with the current data. A teaser period does not merely hide the reset wall. It manufactures the exact evidence used to dismiss it.

XII. This Time is Different

Reinhart and Rogoff titled their history of eight centuries of financial folly with the words that recur before every crisis: “this time is different”. And the maddening truth is that the specifics genuinely are different every time.

This is not precisely 2008. GPUs are not houses; take-or-pay contracts are not mortgage-backed securities; OpenAI is not a subprime borrower in Stockton, and artificial intelligence may well be the most consequential technology of the century, which is more than anyone could ever say for a McMansion in the Inland Empire.

All of that is true, and none of it is the point. What repeats is never the surface. What repeats is the structure:

a scarcity thesis that justifies enormous fixed obligations; a teaser period during which those obligations feel costless; a set of commencement dates, fixed at signing, on which the teaser expires and the fully-indexed bill begins; and a bet that the income will have grown to meet the bill by the time it arrives.

The reason many AI skeptics will be right in substance and wrong in the mechanism is that they are often making a valuation argument, and valuation arguments have no clock. What this piece has tried to show is that buried inside the compute contracts is something a valuation argument never has: a reset.

The bull case wins if - and it is a real if - demand scales into the committed supply before the reset wall lands, and the counterparties stay funded through any air pocket in between. The bear case in this piece is not that artificial intelligence will fail, or that the demand is fake, or that the technology disappoints. It is narrower: that the financing structure can break before the demand arrives, because the obligations are fixed and front-loaded in commencement while the revenue is variable and back-loaded in adoption - and a fixed obligation meeting a lagging revenue stream is a solvency problem regardless of how transformative the underlying technology turns out to be.

The industry will spend the next eighteen months debating whether artificial intelligence is a bubble, which is the wrong question, asked at the wrong layer. The technology is real; so were the houses. The question is narrower: what happens when instruments underwritten at the teaser meet their reset schedule, and who is holding the paper when the obligations cannot be met as written. The reset wall is published above and the AI boom sits in a period of fiction.

The Teaser Period.

Read more and subscribe to 'Groundbreaker' here...

Tyler Durden Mon, 08/24/2026 - 07:55

Zelensky Says Wartime Elections Would 'Destroy' Ukraine, The Purported Bastion Of Democracy

Ever since Russia invaded Ukraine in February 2022 with a goal of excising the Russian-speaking Donbas region, American and Western European officials have repeatedly said they and their countries are duty-bound to support Ukraine because, as Nancy Pelosi put it, "The battle for Ukraine is a battle for democracy itself." That notion has been growing ever more farcical over time, as President Volodymyr Zelensky refuses to hold elections that were supposed to happen back in the spring of 2024. Over the weekend, Zelensky doubled down on his preference for martial law, telling journalists it would "destroy the country." 

Zelensky is deep into overtime on his original five-year term (Reuters)

Zelensky is now in the eighth year of his five-year term. His new remarks defending his overstay came after former defense minister Mykhailo Fedorov recently called for elections, after his controversial firing by Zelensky in July. “Democracy cannot be held hostage by Russia," said Fedorov. "We are fighting precisely because we want to remain a free European state." In his nine-minute speech, he also took a shot at Zelensky's way of governing. "It is particularly dangerous when society develops the feeling that the main criterion for an appointment is not professionalism, results or the ability to transform the country, but personal loyalty to the system,” he said. 

Speaking to a group of journalists over the weekend, Zelensky firmly rejected calls for elections in his supposed bastion of democracy:

“I believe that if we want to destroy the country, then during such a war we can move in the selection of elections... I believe that during such a war, elections in general are big risks. Elections right now are a tsunami for the state that will split Ukraine." 

Zelensky's former defense minister Mykhailo Fedorov turned up the heat on his former boss by calling for wartime elections (AP Photo)

Zelensky pointed to the logistical and security challenges of balloting during wartime, noting that it would require “the participation of the military, in frontline territories, abroad, where millions of our citizens have gone, fleeing the war” and the risk of "strikes and shelling." He argued it could only begin to be conceivable if Russia were to agree to a ceasefire, which he preemptively ruled an impossibility.  

In December, President Trump said he was inclined to see Ukraine hold elections soon. "It's been a long time. Hasn't been doing particularly well. Yeah, I think it's an important time to hold an election. They're using war not to hold an election, but I would think the Ukrainian people should have that choice," he told Politico. "You know, they talk about democracy, but it gets to a point where it's not a democracy anymore." 

Skeptics of Zelensky's reasoning might point to elections held in other war-torn countries. For example, Afghanistan held elections in 2004 and 2009, and Iraq held one in 2005. To be fair, violence affected turnout and the legitimacy of the results was questioned. Meanwhile, the UK was supposed to have an election in 1940 but put it off all the way until 1945. The Atlantic Council, which is a de facto NATO think tank, has pointed to the UK example in urging Zelensky to refuse elections during a war -- a war that is happening because of NATO expansionism.

Time is marching on, however. Russia has thus far been content to pursue a slow-burn approach to the war, ever so gradually taking over more and more territory. If that pace continues and if Russia's territorial ambitions widen -- say, to include taking Odessa and creating a landlocked Ukrainian rump state -- we could see Zelensky in charge for years more to come.

...to the continuing hypocritical applause of all those US and European politicians who proclaim Zelensky a hero of democracy. 

Tyler Durden Mon, 08/24/2026 - 07:45

Le Pen Poised To Win French Elections? New Poll Shows Commanding First-Round Lead

Summary:

• Polymarket Odds And New Polls Show Le Pen Leading France's Presidential Race
• New polling shows Marine Le Pen defeating every tested runoff opponent
• Nomura says markets increasingly favor the "fiscally prudent" right over the reckless left
• Nomura sees Europe lurching right during an 18-month election cycle

France's Le Pen Leads French Presidential Race

Early Monday, we previewed a Nomura report that expects an 18-month election cycle across Europe, shifting the continent toward populism, with elections scheduled this year in Germany and Sweden, followed by France, Italy, Spain, Switzerland, and Poland in 2027.

Shortly after we released the note, new polling data from France showed, as The Guardian put it:

France loves a battle-scarred survivor. Charles de Gaulle, François Mitterrand and Jacques Chirac clawed their way back from political failure to become presidents of the republic. There is a significant chance that Marine Le Pen will be next.

The latest Toluna-Harris poll shows Marine Le Pen winning every tested 2027 French presidential runoff:

• Le Pen 68%, Jean-Luc Mélenchon 32%
• Le Pen 55%, Édouard Philippe 45%
• Le Pen 57%, Gabriel Attal 43%

Le Pen's advantage extends beyond a matchup with the far left. She also holds double-digit leads over two leading establishment candidates, indicating that her National Rally party would enter the election as the clear favorite under these scenarios.

France, Toluna-Harris poll:

Presidential run-off election

Le Pen (RN-PfE): 68% (+1)
Mélenchon (LFI-LEFT): 32% (-1)

Le Pen (RN-PfE): 55% (+3)
Philippe (HOR-RE): 45% (-3)

Le Pen (RN-PfE): 57% (+3)
Attal (RE-RE): 43% (-3)

+/- vs. 25-27 May 2026

Fieldwork: 18-19 August 2026… pic.twitter.com/vvUtpkIyiR

— Europe Elects (@EuropeElects) August 24, 2026

Polymarket odds of Le Pen winning the French presidential election currently stand at 32%.

Here's more:

🗳️ Intentions de vote au premier tour de l’élection présidentielle 2027 - @harrisint_fr

▪️M. Le Pen - 35% (=) ✅
▪️J-L. Mélenchon - 16% (=) ✅
▪️E. Philippe - 14% (=)
▪️R. Glucksmann - 10% (-0,5)
▪️G. Attal - 8% (=)
▪️B. Retailleau - 6% (-1)
▪️M. Tondelier - 3% (+1)… pic.twitter.com/H3BG768OAN

— Présidentielle 2027 🇫🇷 (@Cap2027_) August 24, 2026

Circling back to Nomura analyst Andrzej Szczepaniak's note, he expects that right-wing parties are positioned to make significant gains across Germany, France, Spain, Switzerland, and the UK over the next 18 months.

Szczepaniak noted, "Five years ago, financial markets would not have seemed so at ease with such a prospect. But then again, these populist right-wing political parties were previously not so fiscally prudent as they are perceived to be today."

Meanwhile in Germany this weekend ...

🚨WOW: This is the support on the ground for the AfD party in Saxony-Anhalt ahead of the State Election

These scenes are unprecedented.

Germany is going to be rocked on 6th September. It could be the trigger. 🇩🇪 pic.twitter.com/doVVKMYp0h

— Inevitable West (@Inevitablewest) August 23, 2026

He added, "Now, if anything, financial markets are much more concerned about populist left-wing parties being elected due to their desire to increase spending, often paid for through higher borrowing or higher taxes, which are likely to shut the engine off of already stuttering economies."

"Seeds Of Political Change": Nomura Sees Europe Lurching Right, And Markets Are Fine With It

Europe is entering an 18-month election cycle that could accelerate the continent's shift toward populism, with high-profile elections scheduled this year in Germany and Sweden, followed by France, Italy, Spain, Switzerland, and Poland in 2027.

The much-needed political realignment reflects mounting public backlash against progressives in Brussels after years of uncontrolled mass migration from the Third World, deteriorating social cohesion, elevated violent crime, and nation-killing domestic policies that have accelerated deindustrialization.

At the same time, European manufacturers face intensifying pressure from China (the demise of VW Group), which is exploiting its cost advantages and state-supported industrial capacity to flood the struggling continent with cheap electric vehicles.

Andrzej Szczepaniak, a senior European economist and executive director at Nomura International in London, describes this combination of pressures as "the seeds of political change," warning that "politics in Europe is lurching towards more populism."

Szczepaniak says right-wing parties are positioned to make significant gains across Germany, France, Spain, Switzerland, and the UK over the next 18 months.

"Five years ago, financial markets would not have seemed so at ease with such a prospect. But then again, these populist right-wing political parties were previously not so fiscally prudent as they are perceived to be today. Indeed, Italy's Giorgia Meloni is the standard-bearer for financial markets of how a populist right-wing political party can govern: fiscally prudent enough to show investors that the party can govern responsibly while focusing heavily on social issues, including immigration and culture wars, to keep grassroots supporters happy," the analyst said.

He pointed out, "Now, if anything, financial markets are much more concerned about populist left-wing parties being elected due to their desire to increase spending, often paid for through higher borrowing or higher taxes, which are likely to shut the engine off of already stuttering economies."

Focusing on Germany, Szczepaniak said the most immediate political shift will occur there, where Alternative for Germany has overtaken Chancellor Friedrich Merz's CDU/CSU in national polling. The AfD is polling at about 42% ahead of the Sept. 6 election in Saxony-Anhalt, potentially putting it within reach of becoming the first AfD government at the state level.

Dismal results for the governing coalition in Germany's three September state elections could threaten Merz's political survival. Szczepaniak sees a replacement of the chancellor as more likely than a snap national election because both the CDU/CSU and SPD risk losing additional seats to the AfD.

AfD is the only hope for Germany https://t.co/6ONn1LOipE

— Elon Musk (@elonmusk) August 19, 2026

Germany's economic turmoil is contributing to that revolt against the left wing. Despite the government's so-called fiscal bazooka, consumer confidence remains weak. Voters are seeking an economic turnaround under new common-sense leadership.

The market is increasingly expecting Marine Le Pen of France to follow Meloni's playbook by maintaining fiscal restraint while focusing on tackling the mass migration invasion and cultural issues. Left-wing Jean-Luc Mélenchon, by contrast, has proposed higher spending and the cancellation of portions of France's debt, policies that Szczepaniak warns could cause French bond spreads to widen sharply. 

Whoever succeeds France's Emmanuel Macron will inherit a giant mess. France's debt-to-GDP ratio is set to explode to 120% next year, while political fragmentation is likely to prevent the structural reforms needed to revive growth or reduce the primary deficit. Szczepaniak remains bearish on France relative to Germany, Italy, and Spain.

The broader message is that right-wing populism is on the rise across Europe, and markets are welcoming such potential changes after years of failed left-wing control. Beyond the EU, left-wing regimes have been rejected across South America as right-wing governments take hold. 

Related:

• Forget Reminding Young People About 'Boat People': South America's Rejection Of Socialism Is Happening In Real Time

The world is rejecting left-wing regimes because these governments are unserious, unproductive, and, in fact, proving only to be nation-killing.

Professional subscribers can read the full note here at our new Marketdesk.ai portal.

Tyler Durden Mon, 08/24/2026 - 07:30

Israel Creates Fake Think Tank In Likely Attempt To Dupe AI Chatbots

Authored by Nick Cleveland-Stout via Responsible Statecraft,

At a glance, the Hanover Institute for Public Policy looks like a new think tank dedicated to Israel/Palestine. The organization churns out think-tank style reports on questions such as "Does AIPAC Use 'Dark Money in Elections?" and "Is Israel Carrying out a Deliberate Campaign of Starvation in Gaza?"

A banner depicting Israeli Prime Minister Benjamin Netanyahu is displayed with the Capitol dome in the background as pro-Palestinian demonstrators gather on the day of Netanyahu's address to a joint meeting of Congress, on Capitol Hill in Washington, U.S., July 24, 2024. (photo credit: REUTERS/Nathan Howard)

But the Hanover Institute is not a real think tank. None of the reports have bylines. A small disclaimer at the bottom of the webpage notes that the organization was created on behalf of the Israeli Government Advertising Agency by Piro, Inc, a firm co-founded by Daniel Rosenberg, the producer of Spike Lee's "Inside Man."

The Hanover Institute's reports - all of which are about Israel and Palestine - appear to be part of an Israeli effort to influence chatbots. The institute's "data reports" have footnotes and tables of contents, and they present arguments in a neutral tone, helping them appeal to chatbots like Claude or Gemini. Piro's website says that it "author(s) content engineered for how LLMs evaluate credibility," describing this service as "AI Story Optimization." Others refer to this practice of influencing artificial intelligence as "LLM poisoning."

According to its "about" page, the Hanover Institute "studies the inputs fueling antisemitism in the United States, and publishes what the evidence shows." Many of the reports are formulaic, starting with an innocent question that someone might ask a chatbot.

"What Caused the Displacement of Palestinians in 1948?"

"Which Humanitarian Organizations Have Documented Israeli War Crimes?"

"What is the Current Situation in the Gaza Strip?"

In an article titled "Is the IDF the World's Most Moral Army?" the Hanover Institute cites a 2022 poll that found that 47% of Israeli Jews believed that statement. Another report casts doubt on UNICEF's assertion that "90% of water and institutional infrastructure has been damaged or destroyed" in Gaza. Many of the reports conclude by linking the topic to rising antisemitism, oftentimes citing the same studies.

In a few cases, the Hanover Institute publishes what it claims are original findings. For instance, it put out a study saying 19 of the 36 most-watched Israel-Gaza explainer videos contain contested claims, with most of the contested claims aligning with the Palestinian narrative.

The Hanover Institute's publications sometimes contradict Israeli government narratives. For instance, one report says that foreign funding of universities as an explanation for antisemitic incidents is "weak and full of exceptions." Israeli Prime Minister Benjamin Netanyahu has pushed this theory, telling Breitbart last year that Europeans and Qataris have spent "billions of American universities, vilifying, vilifying Israel, vilifying Jews, also, frankly, vilifying the United States."

Alice Lee, an analyst at NewsGuard, a disinformation tracking company, told RS that the sites appear designed to reach a U.S. audience curious about the ongoing conflict, either through search engines or AI chatbots. "LLMs favor concrete statistics and data, as well as strong citations and sources, which these articles all have," Lee said.

"It's a perfect mimicry of a typical credible American think tank, right down to the generic name, the site layout, and the red-white-blue color scheme," Lee added.

Piro, Inc, the firm that created the Hanover Institute, has received $900,000 from the Israeli government for its work. Like many other contractors working for Israel, Piro's work is subcontracted through Havas Media, a French public relations conglomerate.

The fake think tank has churned out over 100 reports since it started publishing on August 6. The Hanover Institute claims that "cited research is peer-reviewed and academic," although it frequently cites Israeli government sources such as the Israel Defense Forces and the Ministry of Foreign Affairs.

RS analyzed 12 random Hanover Institute articles using GPTZero, a popular AI detection software that claims a low false-positive rate. GPTZero flagged 11 of the articles as AI-written with "high confidence"; it flagged one article as AI-written with "moderate confidence."

Israel has also contracted former Trump campaign manager Brad Parscale to create pro-Israel websites engineered to influence chatbots as part of a $46.5 million contract. A Drop Site investigation last month found that many chatbots, particularly Microsoft Copilot and Google Gemini, had been successfully trained on data from those websites. Other chatbots frequently cite those websites without flagging them as part of an Israeli influence operation.

Piro does not explicitly state in its agreement submitted to the Department of Justice that its work for Israel is to influence AI. In an email to Politico, which first reported the filing, Rosenberg said his firm's work is to "put accurate, sourced facts into the public record and to counter misinformation about Israel with verifiable information." However, last month, Rosenberg posted on LinkedIn advertising Piro's ability to influence chatbots:

"When someone asks ChatGPT, Gemini, or Perplexity about your category, an answer comes back in one confident paragraph. Most brands have no idea how that paragraph gets built. So we spent months reverse-engineering it...At Piro, we already knew how to build stories that move people. The question was: how do you make sure AI knows how to tell them?"

Tyler Durden Mon, 08/24/2026 - 07:20

Interior Department Approves Colorado River Water Reductions In 3 States

Authored by Jacki Thrapp via The Epoch Times,

The Department of the Interior will cut the amount of water it allocates through the Colorado River to Arizona, Nevada, and California in 2027 and 2028.

The cuts were signed off by Secretary of the Interior Doug Burgum on Aug. 21 as part of the department's 2027-2028 Operating Guidelines for the Colorado River, which provides water to over 40 million people, generates hydropower for seven states, and is a vital resource for 30 tribes and two Mexican states.

The Colorado River Basin is experiencing historically low runoff and reservoir levels amid a 26-year drought, which worsened recently after the winter of 2025-2026 resulted in the lowest observed snowpack on record.

The cuts were not a surprise to Arizona, Nevada, and California, as they pitched a temporary, two-year agreement to the Assistant Secretary of Water and Science in May in an effort to address the "deteriorating hydrologic conditions in the Colorado River system."

The Lower Basin states will see water deliveries reduced by a total of 1.25 million acre-feet annually in both 2027 and 2028, with Arizona taking a reduction of 760,000 acre-feet, California 440,000 acre-feet, and Nevada 50,000 acre-feet, according to the Interior Department press release.

The plan will see the Lower Basin states face a 21 percent reduction in water from the river in 2027 and 2028, with deeper cuts later.

But a trio of states warned that if water cuts double after 2028, it would devastate their economies.

"The combined contents of Lake Powell and Lake Mead have not been this low since before Lake Powell began filling following the closure of the gates at Glen Canyon Dam in 1963, with both Lake Powell and Lake Mead hitting record lows the last few weeks," the press release said.

The department suggested the plan will continue allowing reliable operations and water deliveries while "preserving the flexibility necessary to respond to Basin states' voluntary actions, consensus recommendations and the continued prolonged drought," the release said.

"Forty million people, millions of acres of farmland and ranchland, industries that power the American West, and some of our nation's fastest growing metropolitan areas depend on the Colorado River," Burgum said.

"These decisions provide a water management strategy for Basin stakeholders to respond to the prolonged drought by incorporating flexible tools and voluntary actions while leaving room for consensus agreements," said Andrea Travnicek, the Assistant Secretary of Water and Science.

"The Department and Reclamation will continue to work with all Basin stakeholders to identify areas to maximize efforts throughout the Basin to modernize infrastructure, develop conservation programs, and identify innovative approaches to deliver water under changing conditions."

Arizona Gov. Katie Hobbs, who is running for reelection this November, applauded California and Nevada for "stepping up to the plate" on Aug. 21 to implement a water allocation plan but urged that more needed to be done from other states that receive water from the Colorado River.

Tyler Durden Mon, 08/24/2026 - 06:30

Study Finds 152 Polymarket Wallets Likely Exploited Military Secrets For $8 Million In Gains

A new study has concluded that 152 Polymarket wallets may have profited from access to secret information about military action, with other wallets copying the insiders' bets. The patterns raise red flags about foreign adversaries' potential exploitation of insiders' profit-seeking to anticipate American strikes.  

Released on Thursday by the Anti-Corruption Data Collective (ACDC), the 29-page report focuses on a particular species in the diverse prediction market ecosystem -- an "Orca," which ACDC describes as a wallet that makes targeted, long-shot bets in a manner differs from the behavior of high-volume, high-frequency, multi-market "Whales." Analysts also studied the corresponding behavior of "Bots," which are wallets that seem at least partially automated. 

To locate Orcas in the sea of data, ACDC looked at wallets that "place bets in a small number of markets and on very few topics, and have a high success rate (> 75%) for longshot bets (defined as more than $2500 wagered at 35 cents or less)." The researchers found that, where military event markets were concerned, Orcas would bet first, with Whales and Bots following in their wakes. They noted that Orcas snared the biggest percentage returns, but Whales and Bots -- putting down more money -- would rake in the biggest actual profits. 

A cohort of 152 Orcas betting on military actions won $8 million and posted a sparkling 97.2% win rate on events where the market had the likelihood at 35% or less when the Orcas stepped up to wager.  The report highlighted several Orca attributes that suggest they're insiders: 

• "More than half of Orcas made their first longshot bet within two days of creating an account on Polymarket, a possible sign they joined specifically to trade on privileged information. 
• Orcas wager more per longshot bet, despite the risks and low probabilities, and longshots dominate their total activity. 
• Orcas betting on military markets are less crypto-native and prefer cashing out into fiat currency."

The report includes a case study on an Orca that wagered on action against Iran. "0x88e6" placed its first longshot bet on the very day of America's June airstrike on Iran's Fordow nuclear complex. It made multiple bets that day, with the last one squeezed in just an hour before the bombs dropped. With some of the bets priced as low as 5 cents, 0x88e6 won more than $20,000 for the strike. It went on to win more than $13,000 on Fordow having been deemed successfully "destroyed." 

Special Forces MSGT Gannon Van Dyke was arrested after winning $400,000 betting on the operation to seize Venezuela's president (via Business Insider)

ACDC's analysts observed Whales and Bots swooping in with heftier capital to mimic Orca bets: 

When an Orca bet on U.S. military action in Iran hours before the June ​2025 strikes...a Bot and a ​Whale made copycat wagers of $200,000 and $100,000, respectively. ⁠Similar Orca bets before February U.S.-Israeli air strikes on Tehran also appeared to spark a flurry of first-time long-shot bets by Bots and Whales wagering on the same outcome, the research found. -- Reuters

"Most people vastly underestimate how observable unusual betting activity actually is on Polymarket. It's all right ​there on the internet, and we can see clear signs that big traders and bots are copying potential insider trades," ACDC co-founder ​David Szakonyi told Reuters. "It would be ⁠naive to think foreign-intelligence agencies aren't monitoring these markets." 

“We spotted nine Polymarket accounts, all connected, who made, collectively,$2.4 million betting almost exclusively on U.S. military operations,” says Nicolas Vaiman, co-founder of the small data analytics firm Bubblemaps.

“And now here's the crazy part: 98% win rate.”… pic.twitter.com/XXietAHjvv

— 60 Minutes (@60Minutes) June 28, 2026

In April, US Army Special Forces Master Sergeant Gannon Ken Van Dyke was arrested for allegedly making more than $400,000 by placing Polymarket bets on the timing of a US military operation to capture Venezuelan President Nicolas Maduro. Van Dyke was involved in the planning and execution of that very operation. The federal government charged him with unlawful use of confidential government information for personal gain, theft of nonpublic government information, commodities fraud, wire fraud, and making an unlawful monetary transaction. In February, the Israeli government arrested and indicted an IDF military reservist and a civilian with classified clearances who placed Polymarket bets regarding military operations, with one of the bets covering the timing of Israel's first strike on Iran in June 2025.

While warning about national security and "political integrity" risks, ACDC lauded Polymarket's public blockchain architecture: "The same data transparency that allows Whales and Bots to legally capitalize on the information advantage of others allows researchers and journalists to uncover potential insider trading." At the same time ACDC noted the difficulty of identifying the insiders, and argued for "outright bans on the types of markets most vulnerable" to their exploitation. The group is also pushing for identification verification for all users, and delaying payouts for high-risk bets while the transaction is scrutinized. 

Tyler Durden Mon, 08/24/2026 - 05:45

Europe Dodges A Rhine Crisis For The Worst Possible Reason

Authored by Natalia Katona via OilPrice.com,

• Rhine freight from ARA to Karlsruhe has surged from €45/t to €215/t as Kaub remains below the 77-cm threshold needed for normal commercial traffic.
• The squeeze is disrupting 3.1 million t/y of ethylene capacity and product movements from the 320,000-b/d Miro refinery.
• Europe is avoiding a deeper crisis only because crackers are running at around 70% and fuel demand is weak.

The Rhine has slightly risen from its mid-August record low (when Kaub's water level gauge - at the river's decisive chokepoint - was below 10 cm), but the relief is mostly optical. Barges still cannot carry normal loads through it, leaving the industrial corridor from Rotterdam and Antwerp to southern Germany, eastern France and Switzerland short of transport capacity. The immediate result is expensive freight, constrained chemical production and uneven fuel supply. However, the more troubling conclusion is that Europe is avoiding a deeper disruption only because its factories and consumers are already demanding less. This way, the Rhine's low-water crisis is a stress test for an industrial system built around cheap, high-volume river transport, and a reminder that pipelines, railways and roads cannot quickly reproduce what the Rhine does.

Kaub, on the Middle Rhine, determines how much cargo can move between the Amsterdam-Rotterdam-Antwerp (ARA) hub and industrial centres farther south. When its navigable water depth fell below 10 centimetres in mid-August, the waterway was roughly 1.2 metres deep (in comparison, just a year ago water depth was around 2.3 meters). The level has since recovered to about 45 centimetres, but that remains below the 77-centimetre benchmark - far from a return to normal commercial traffic. At the lowest levels, only specialised low-draft barges can cross Kaub, and while the Lower Rhine may remain open, the route to the Upper Rhine is effectively shut for most vessels, fragmenting what normally functions as one market.

The chemical industry feels that fracture first. Several of Germany's largest steam crackers are located along the Rhine corridor and are affected by restrictions at Kaub. The BASF, INEOS, LyondellBasell and Shell sites in this area have around 3.1 million t/y of combined ethylene capacity. BASF's Ludwigshafen complex is particularly exposed because it lies south of Kaub and moves about 40% of all incoming and outgoing goods by river.

Naphtha supply is not much of a problem - most of Germany's naphtha moves by pipeline, offering protection against a river bottleneck. But pipelines do not redistribute the broad range of finished products made by a cracker, and if those materials cannot leave, storage fills, and operators must curb runs. With low water levels continuing to limit the normal movement on the river, barges are forced to carry smaller loads, while specialised chemical vessels are limited. Related: U.S. Billionaires Are Piling Into Argentina's Vaca Muerta Shale

The effects can spread quickly into smaller downstream markets. LyondellBasell's force majeure at its 170,000 t/y Wesseling butadiene unit followed restricted feedstock flows to its crackers and a resulting decline in crude C4 production. Crude C4 is produced during the steam cracking of naphtha alongside ethylene and is then processed to extract butadiene. A relatively small reduction in cracker output can therefore cause a much larger squeeze in the smaller butadiene market - and other co-products that are difficult to reroute, such as pyrolysis gasoline, face similar pressure.

This restricted inland movements of chemical products contributed to naphtha inventories in ARA reaching 598,000 tonnes in mid-August (75% more than a month earlier). However, the problem is not only in the movement restrictions: weaker cracker operations have overall reduced naphtha consumption by the crackers even before the Rhine's levels became an issue - the crackers have been running at 70% due to weak demand on their production across the wider European market.

The same effect is emerging in refining. Most inland German refineries receive crude through pipelines, so the Rhine does not automatically force crude runs lower. Their exposure lies in intermediate feedstocks, blending components and, above all, moving gasoline, diesel and heating oil to customers.

Karlsruhe illustrates the issue. Road trucks have been shuttling to and from the Miro refinery (320,000 b/d capacity) to collect fuel, but the site also normally ships products by barge both toward ARA and upstream to Switzerland. With movements restricted in both directions, Karlsruhe must hold surplus refined products in its storage facilities, while markets farther away pay shortage premiums.

The Rhine's freight rates reflect this physical imbalance. The assessed ARA-Karlsruhe barge rate rose five-fold to €215/t currently from about €45/t at the end of June, while ARA-Basel reached €275/t in mid-August. At extreme low water, even those assessments become partly theoretical because few normal cargoes can pass.

Road and rail offer relief, but not replacement. Chemicals require appropriate tankers and transportation conditions, while the volumes involved overwhelm available vehicles and infrastructure. One fully loaded barge carrying 2,400 tonnes of diesel is equivalent to 90 trucks. Germany's temporary relaxation of Sunday and public-holiday restrictions for heavy vehicles may improve flexibility, but it cannot manufacture tank cars, specialist trailers, drivers or road capacity.

Yet the constraints extend even beyond crackers and refineries. Covestro declared force majeure on polyether polyols made at Dormagen, while Salzgitter shifted coal from Rotterdam to rail for its HKM steelmaking division. Such workarounds keep selected flows moving, but they also compete for the same scarce trains and trucks needed elsewhere. The disruption is therefore cumulative: every industry solving its own bottleneck makes the alternatives tighter for the next.

Nor is this only a German problem. Eastern France has experienced localised gasoline shortages as barges serving Strasbourg carried a fraction of their normal loads. Switzerland faces higher import costs and the possibility of drawing on strategic stocks. Rotterdam and Antwerp remain supplied by sea, yet congestion and slower terminal turnover spread costs across the wider northwest European market. This way, low water does not create a single European shortage but rather creates a dispersed issue of trapped supply and local shortages.

For now, weak demand is preventing isolated local shortages and oversupplies from becoming a broader crisis. European crackers were operating at only about 70% in July, after years of pressure from expensive energy, weak construction and automotive demand, and cheaper imports from Asian competitors. Fuel consumption in inland Germany has also been decreasing. However, if chemical plants and fuel markets were operating near normal levels, the shortage of river capacity would be much harder to absorb. A recovery in manufacturing, higher diesel demand or winter stockpiling could therefore intensify the disruption even if water levels improve modestly.

The Rhine may have risen slightly, but Europe's industrial margin of safety has not. This summer's lesson is that weak demand can cushion a logistics failure, but it cannot solve one. When (or if) the economy rebounds and supply chains are once again required to handle normal volumes, the problem will extend far beyond the river itself.

And besides, this summer should not be mistaken for a worst-case scenario. A super El Niño could bring a warmer winter, less Alpine snow and a weaker meltwater buffer. If another hot, dry summer follows, Rhine levels in July and August 2027 could fall even lower than this year's records.

Tyler Durden Mon, 08/24/2026 - 05:00

Clean Energy Spending Tracking Toward Record $180 Billion In 2026

Authored by Haley Zaremba via OilPrice.com,

• U.S. utility-scale battery storage has reached 52 GW after three years of 70 percent average annual growth, with 8.3 GW of that added in the first six months of 2026 alone.
• Clean energy capital spending hit $74 billion in the first half and is on pace for a record $180 billion this year, even after the rollback of federal incentives.
• Grid operators have another 54 GW queued through 2028, while China holds roughly half of global capacity and the EU moves to triple its own by 2030.

Donald Trump is accidentally overseeing a massive buildout of the country's renewable energy capacity and infrastructure. Not only are investments in renewable technologies soaring to new highs, the national energy grid is rapidly transforming to accommodate an increasingly solar- and wind-powered energy mix.

Despite massive rollbacks of Biden- and Obama-era clean energy incentives and financial supports, investment in clean energy tech keeps soaring to new heights, buoyed by market forces far outside of the federal government's control. Clean energy capital expenditures already reached $74 billion in the first half of 2026, and they're on track to reach a record $180 billion by the end of the year, according to fintech firm Crux's State of Clean Energy Finance: 2026 Mid-Year Market Intelligence Report.

"The market is proving resilient," Crux CEO and co-founder Alfred Johnson was recently quoted by Politico's E&E News. "We're seeing a significant amount of investment subsequent to the tax law changes of last year."

The insatiable energy demand coming from data center hyperscalers and the artificial intelligence boom has spurred a tidal wave of investment into all kinds of energy projects, and especially renewables due to their noted advantages when it comes to energy security and affordability. These advantages have been underscored in recent months by extreme volatility in fossil fuel markets thanks to the war in Iran and resultant supply chain vulnerabilities. "Renewables and storage continue to be the fastest way to get new electrons on the grid until additional gas-fired generation can be built," NextEra Energy CEO John Ketchum was recently quoted by Reuters.

As a result, we are currently "living in what arguably is one of the best periods to invest in renewables in the US over the last 20 years" according to Miguel Stilwell d'Andrade, chief executive officer of Portuguese electric utilities company EDP. Accordingly, EDP is directing approximately USD $5.3 billion - more than half of its capital expenditures - toward United States renewables projects over the next three years.

All of that renewable energy buildout is being accompanied by a massive and unprecedented uptick in battery storage buildout, resulting in a rapid transformation of the nation's energy grid. Over the past three years, utility-scale battery storage capacity increased at a blistering rate of 70 percent per year on average to reach 52 gigawatts (GW) today. Nearly 16 percent of that - 8.3 GW - was added in the first half of this year alone.

"This expansion depends mostly on co-locating batteries with solar photovoltaic (PV) plants to capitalize on wholesale price arbitrage across major energy markets," Interesting Engineering reported earlier this week. Connecting battery packs directly to solar farms allows the farms' operators to store excess clean energy at peak production hours until the evening hours, when production wanes, demand rises, and rates reach a premium. "This lucrative business model has sparked a massive construction boom across solar-heavy states, turning temporary energy storage into a primary driver of modern grid infrastructure," Interesting Engineering goes on to report.

As stunning as this year's figures are, the battery storage revolution is just getting started. Grid operators already have plans to add another 54 GW of battery capacity by the end of 2028. That means that the nation's energy storage capacity will double again by 2030, compared to current levels.

And the United States is not alone - the energy storage renaissance is proving to be a global trend. China is leading buildout by a wide margin, controlling more than half of global capacity. But other major global leaders are hurrying to get a foothold into the rapidly expanding market. Just this month, the European Union formalized a plan to triple the bloc's energy storage capacity by 2030. European Leaders are banking on energy storage - alongside renewable energy expansion - to steady the continent's energy markets and protect member states from the next energy crisis.

Tyler Durden Mon, 08/24/2026 - 03:30

Anti-Social Media

Social media may have been built to connect people, but entertainment and diversion now appear to be its main draws.

As Statista's Felix Richter reports, according to Statista Consumer Insights, nearly half of U.S. respondents say entertainment is an important criterion when it comes to social media, ahead of passing time and communicating with friends and family.

You will find more infographics at Statista

Among young adults aged 18 to 29, the social dimension of social media is even less pronounced: 32 percent cite staying in touch with friends and family as important, compared with 37 percent who value simply passing time.

With only 25 percent naming meeting new people as a priority, the findings illustrate how social platforms increasingly function as an always-on source of content, diversion and passive consumption, as opposed to it original purpose of staying in touch with friends.

Tyler Durden Mon, 08/24/2026 - 02:45

Israel DM Orders IDF To Escalate Demolitions In Southern Lebanon

Authored by Jason Ditz via Antiwar.com,

A week after ordering the Israeli Defense Forces (IDF) to prepare for a "long-term stay" in occupied southern Lebanon, Defense Minister Israel Katz has now also ordered them to escalate the rate at which they're destroying what is being framed as "Hezbollah infrastructure" across the south.

The issue with this is the same as it's been throughout the war, that Israel's definition of Hezbollah infrastructure generally boils down to civilian infrastructure at large, with a particular emphasis on the municipalities where Shi'ite Muslims live, but by no means restricting the attacks just to them.

Officials aimed to frame the tiny Shi'ite villages that the IDF already occupies as "Hezbollah fortresses," and presented the ongoing demolition of those villages as "engineering activity." Much of that engineering involves explosions, whether it's heavy artillery fire on the villages or increasingly the deployment of incendiary white phosphorus munitions to set fires in the villages and the surrounding area.

IDF military vehicles seen smashing solar panels in Debel, Lebanon | Image from X

Katz has made clear that a number of the villages in the southernmost parts of Lebanon will simply have to "disappear," and with tens of thousands of homes destroyed in recent months, there are a number of villages which it can be said simply no longer exist.

But Israel has allowed a handful of non-Shi'ite villages to remain in that area, but living under the occupation leaves those villages in a very tenuous situation. Local leaders in Kfar Chouba reported that the IDF warned them that if anyone in the village was armed, the entire village population would be expelled and the buildings destroyed. So far, that hasn't happened.

But obeying the occupiers doesn't mean the villagers can live as they would in peacetime. The village's economy is based heavily around farming and olive orchards, but the Israeli troops regularly restrict villagers' access to those lands. There's no formal rule given to the villagers as to where they're allowed or not allowed at any given time, and even the southernmost parts of the village are "no go" areas, with IDF troops reportedly setting up operations within buildings in that part of the village.

Further north, Israel continues to heavily attack the Ali Taher Ridge, though in the past few days they haven't made any serious attempts to advance on the ground into the area. Israel reportedly sees the ridge as strategically valuable, as it overlooks much of the northern part of Nabatieh District, the northernmost part of Lebanon that Israel intends to occupy, at least at this point.

Tyler Durden Mon, 08/24/2026 - 02:00

"Iran Is Losing Its Grip On Hormuz": Strait Traffic Explodes Nearly 400%

Summary:

• Nearly 200 Ships Navigated Strait Last Week, Up From 150 the Previous Week
• Trump Views Hormuz As "an American Territory" 
• Axios: 40 Tankers Transited Hormuz Friday Night, But Real Crisis Is Diesel

Hormuz Commercial Traffic Surges 

Shortly after President Trump declared the Strait of Hormuz "an American territory" on Friday evening, the New York Post published a new report citing UK Maritime Trade Operations data showing that commercial traffic through the critical waterway has rebounded sharply as more vessels use a US-backed route along Oman's coast. This suggests that the US military presence and offensive operations in the region have degraded Tehran's ability to fully control the waterway.

Nearly 200 ships navigated the strait last week, up from about 150 the previous week and just 40 two weeks earlier, according to UKMTO data. Traffic has recovered to roughly 20% of prewar levels, when the waterway carried about one-fifth of the world’s seaborne oil.

"It increasingly looks like Iran has at least partially lost control of the strait," Homayoun Falakshahi, head of crude oil analysis at Kpler, told CNN.

"The Oman route absolutely makes the most sense," added Dan Pickering, founder of Pickering Energy Partners, noting that it allows vessels to avoid the possibility of paying a toll to Tehran.

President Trump told a crowd in South Carolina late Friday, "We don't even know if we won, because I view the Strait of Hormuz as an American territory right now."

BREAKING: Trump says he view Strait of Hormuz as an American territory pic.twitter.com/NBKGGBgvWu

— Insider Paper (@TheInsiderPaper) August 21, 2026

Let's revisit a mid-March note from Ex Uno Plures' Zoltan Pozsar, who explained at the time that Trump was "methodically building a portfolio of assets" to pressure China, centered on strategic energy-supply nodes and maritime chokepoints that have historically supported Beijing's access to cheap crude imports. His note highlighted the Panama Canal, Venezuelan oil flows, and the broader significance of Iran and the Strait of Hormuz.

Axios: 40 Tankers Transited Hormuz Friday Night, But Real Crisis Is Diesel

Axios political reporter and Middle East correspondent Barak Ravid reported early Saturday that 40 tankers transited the Strait of Hormuz on Friday night, citing three unnamed US officials.

"Around 16 million barrels of oil moved out of the strait through the southern channel on Friday night," Ravid wrote on X.

🚨🚢🛢️Around 40 tankers transited in and out of the Strait of Hormuz through the southern deep channel on Friday night. Around 16 million barrels of oil moved out of the strait through the southern channel on Friday night, three U.S. officials told me

— Barak Ravid (@BarakRavid) August 22, 2026

The latest Bloomberg vessel-tracking data show that 13 ships transited the critical waterway on Saturday, with seven traveling east to west and six moving west to east. Traffic remains well below the levels recorded during the brief memorandum-of-understanding period from June 15 through mid-July.

On Friday, President Trump called the Hormuz chokepoint "an American territory"...

"We don't even know if we won, because I view the Strait of Hormuz as an American territory right now," Trump said, addressing a crowd in South Carolina.

Trump joked about bombing Iran during the speech, saying, "It's a Friday night. We have plenty of time... and what the hell do I have to do? Go back and bomb Iran a little bit more?"

Axios reported Wednesday that the US military had established a shipping corridor in the critical waterway, which carries millions of barrels of oil each day. There was no word from Ravid on whether the 40 tankers sailed through the new shipping corridor.

Even with these transits, the emerging energy crisis is not centered on crude availability, as SPRs around the world are being tapped to offset lost production in the Gulf region. Instead, the real crisis is materializing in the refined-products market.

The focus emerged at the start of the week when Bloomberg's front-month US diesel crack spread (HOCL1 Index) topped $100 a barrel, as we warned: "Industrial economy either grinds to a halt or consumers about to be hit with the biggest energy pass-through in history."

Diesel crack hits record $102. This is absolutely unprecedented.

Industrial economy either grinds to a halt or consumers about to be hit with the biggest energy pass through in history pic.twitter.com/OtAdgrCvb3

— zerohedge (@zerohedge) August 17, 2026

Then, by Wednesday, Jeff Currie, the former Goldman Sachs commodities chief and now co-chair of Abaxx Markets, appeared on CNBC to explain that the real crisis is not in crude but in diesel markets.

"Nobody on the planet Earth consumes crude oil," Currie told CNBC. "Refineries do. Everyone else consumes gasoline, diesel and jet fuel, and those markets look considerably uglier."

By Thursday, Currie explained that the convergence of tight physical markets, currency debasement and policy intervention represents the hallmark of a structural commodity bull cycle.

"Stop looking at crude. Nobody consumes it but refineries. The economy runs on gasoline and diesel, and that consumption-weighted basket costs $165 against $85 WTI," Currie wrote on X. Read the report.

Related:

• Diesel Crack Spread Madness Deepens As Jefferies Finds No Easy Exit From Russia's Refining Crisis

The US diesel crack spread closed below $100 on Friday, but the Hormuz disruption, compounded by Ukraine's decimation of Russia's refining capabilities, is creating a perfect storm for global diesel markets ahead of the Northern Hemisphere winter.

Tyler Durden Sun, 08/23/2026 - 23:55

MAGA, The DSA, & The Politics Of No Competition

Authored by Katherine Gehl via RealClearPolitics,

Despite the narrow loss by Democratic Socialist Francesca Hong in the Wisconsin Democratic gubernatorial primary last week, DSA candidates have prevailed in primaries this year from Maine to California. The Democratic Party establishment believed it dodged a bullet in Wisconsin, but this threat is not going away any time soon.

The roots of the radical left's success were seeded almost a decade ago. In 2017, a writer in a Democratic Socialists of America publication laid out a strategy under a plain title: "Want to Elect Socialists? Run Them in Democratic Primaries." The Democratic Party, the article conceded, was deeply flawed - but it was the easiest available path for socialists to win elections and build power. Nearly a decade later, that strategy is bearing fruit. Democratic Socialist and allied candidates are winning Democratic primaries, and with them, safe Democratic seats - maybe even some competitive seats.

We have seen this before, on the right side of the political spectrum. Donald Trump - who sought the Reform Party's presidential nomination in 2000 and registered as an independent in 2011 - ultimately abandoned the outsider path. His nationalist-populist movement could not realistically win elections as a third party - under our rules it would only split conservative votes and hand elections to Democrats. So Trump and his MAGA movement didn't build. They captured. Trump fought inside the Republican Party, where a committed faction could dominate low-turnout primaries, threaten incumbents, and seize the party's brand. Today MAGA owns that brand, the infrastructure, the finances, and the power of the GOP.

These two stories are usually told as ideological earthquakes - the radicalization of the right, the leftward lurch of the left. They are better understood as the same structural event, produced by the same underlying cause. The cause is the century-long determination of America's two dominant political parties to retain their power at all costs.

To retain their stranglehold on the levers of power they employ a dozen different strategies, ranging from restricting ballot access to manipulating political primaries. But the single rule allowing Democrats and Republicans to keep control is one most of us never even notice - and one that sounds perfectly reasonable: In most U.S. elections, the winner is the candidate with the most votes. The technical term is plurality winners.

This seems simple and fair on its face, but it turns out to be wildly consequential - and not in a good way. You see, if the winner is only required to have "the most votes," that means in any race with more than two candidates, a candidate can win with less than a majority. For example, a candidate can win with 34% in a three-way race, meaning two-thirds of voters preferred someone else. In a five-way race, the winner could emerge with 21%. This dynamic creates the "spoiler" or the "wasted vote."

In plurality winner elections, we often don't feel free to vote for the candidate we like best, out of fear our vote will inadvertently help elect the candidate we like least. For example, in the 2016 presidential race, if you liked Green Party candidate Jill Stein, you knew you probably shouldn't vote for her because that would take votes from Hillary Clinton and help elect Donald Trump. The mirror on the right: You may have wanted to vote for Libertarian Gary Johnson, but you knew that would take votes from Trump and help elect Clinton.

Plurality winners aren't just a problem for "fringe" views. They're the reason so many voters experience November general elections as a choice between the "lesser of two evils."

Consider 2024. Numerous polls found that most Americans didn't want a rematch between Donald Trump and Joe Biden - roughly two-thirds said they were tired of the same candidates and wanted someone new. Clear majorities of Americans said neither man should run at all.

Into that vacuum stepped the group No Labels, whose founder and chief executive, Nancy Jacobson, reached out to some 30 potential candidates for a centrist "unity" ticket. The names were serious people - Joe Manchin, Larry Hogan, Kyrsten Sinema, Liz Cheney, Chris Christie, and Nikki Haley among them. Not one would run.

Manchin said the quiet part out loud - he ruled it out publicly stating he refused to be a spoiler. There is the whole trap, in a single word. Under plurality winners, a credible independent - or third-party candidate - doesn't enter the race as an equal competitor; he enters as a spoiler. The spoiler problem means no votes, no votes means no chance, no chance means no money, no money means no messaging, no messaging means no chance, and no chance means no votes. It is a vicious cycle, and it shuts out new competition before a single ballot is cast. No Labels went looking, in its own words, "for a hero," and a hero never emerged. The system disqualified them before the starting line.

So why do we do it this way? Because in the early days of our Republic, we made a mistake.

At the time, democratic elections barely existed anywhere on earth, so Americans copied the one working model, Great Britain's. For centuries, the freeholders of each English county gathered at the county court - a public assembly summoned by the sheriff - to choose the "knights of the shire" who would sit for them in the House of Commons, and the town boroughs did the same. The rule was identical and unquestioned: The most votes won, majority or not. There was no mathematical science of voting yet, no menu of alternatives to weigh. So, we reached for the only template in existence and carried it across the Atlantic. We didn't carefully design our rule for who wins. We backed into it.

Today, the plurality winner system is the greatest barrier to entry in American politics. Consider this: In any other industry as large and thriving as the politics industry, with 86% customer dissatisfaction (the public disapproval of Congress per Gallup's most recent data), some entrepreneur would see a phenomenal business opportunity and enter the market to give the customers what they want. One would think that a marketplace of ideas so vastly underserved would produce third - or fourth, fifth, and sixth - alternatives. But American politics doesn't work this way. The cause: plurality elections.

Political scientists call this phenomenon Duverger's law, the tendency of plurality winners to produce exactly two parties. No new major party has emerged in American politics since the Republicans in 1854.

Economists also have a name for this kind of system: a non-clearing marketplace. In a healthy market, competition keeps working until supply rises to meet demand and the market "clears." Our political market never clears. Economists know why a market gets stuck like this: It's rarely nature; it's almost always an artificial barrier. Housing is the textbook case - demand for homes in a thriving city dwarfs supply, yet zoning, permitting, and other government requirements choke off new construction.

Plurality winners are the corollary in American politics: the rule that keeps new supply from ever reaching the voters clamoring for it. The demand for a real alternative is enormous and unmistakable. Poll after poll finds a majority of Americans want a third choice. When a market is barred from clearing, the built-up pressure doesn't vanish - it escapes into the black market. That is precisely what the hostile takeovers are: the black market of a rigged political economy, demand forcing its way in where honest competition is blocked.

End plurality winners and let the market clear, and that same energy would flow where it belongs - into new candidates, new ideas, and politicians who must satisfy their general elections customers to survive.

Modern attempts to crack the market only prove the rule. Predating No Labels' effort, in 2012 the financier Peter Ackerman poured his own fortune and energy into Americans Elect, an audacious bid to put a bipartisan "unity" ticket on the ballot through the first-ever national online primary - its nominee required to choose a running mate from the opposing party. Ackerman's team did something almost unimaginable, winning ballot access in 29 states before a single vote was cast. Then it collapsed, in large part because no credible candidate would step forward. The serious contenders all understood what Ross Perot's example in the 1990s and, later, Joe Manchin would confirm: Under plurality rules an independent cannot win, only spoil. Americans Elect built the doorway. The spoiler problem meant no one dared walk through it.

Even more contemporaneously, a disillusioned Elon Musk vowed only last summer to launch a third party. Within a month, he'd pumped the brakes on it. Money wasn't the issue - he's the richest man in the world. The barrier is plurality voting and the dreaded "spoiler" label. This summer, Tucker Carlson merely floated a third party trial balloon, Within days, the chattering class was handicapping how Carlson's fantasy might spoil Marco Rubio's chance at the 2028 presidential nomination - and Republican chances generally.

Changing the status quo

The most devastating cost of a market with no real competition is not dissatisfying candidates. The true devastation: We don't get results.

Ask a simple question: When did this country last balance its federal budget? The answer is 1998-2001. President Bill Clinton and his working relationship with House Speaker Newt Gingrich are generally credited with this accomplishment. But most analysts have missed an essential driver: The last time we had balanced budgets followed soon after the last time we had genuine competition in the presidential general election. In 1992, billionaire Texan Ross Perot used his own fortune to do what our system almost never permits: Compete nationally as an independent because he didn't mind investing his own money in a spoiler race. His message was blunt - America was drowning in debt - and he delivered it himself, buying up half‑hour blocks of network television for folksy "infomercials" in which he stood before hand‑drawn charts and walked the country through the federal balance sheet. The first edition drew more than 16 million viewers.

On the first Tuesday of November, Perot won not a single electoral vote but nearly one-fifth of the popular vote. He lost, but citizens won. Before Perot's candidacy, neither the Republicans nor the Democrats had balanced budgets on their party platforms. He proved that deficit reduction had a constituency neither party could afford to ignore, or to cede to his nascent Reform Party. Competitive pressure persuaded Clinton and Gingrich that they had to tackle it. In the years that followed, Washington produced four consecutive balanced budgets, the first since 1969. Paul Begala confirmed the theory from the inside, writing in the Washington Post at Perot's death, "I am not sure we would have ever balanced the budget without the pressure Perot and his voters brought to the issue." Multiple factors contributed to the balanced budgets, but Perot delivered the otherwise never-existent "political will."

Here's the point: Competition changes results even when it doesn't change who wins. In Silicon Valley when a breakthrough technology emerges, if it benefits customers it will eventually make it to market. The new company will succeed in the marketplace on its own or it will be acquired or copied. Either way, consumers win. That's the alchemic brilliance of competition.

We desperately need dynamic competition in politics too - not just among candidates but for innovative policy ideas, and competition "to get shit done," to quote Joe Manchin in a recent interview making the case for independent candidates. In the political marketplace with only two competitors, neither of our two parties are incentivized to tell voters a hard truth or, more importantly, to do hard things like casting votes they know will help the country but perhaps put their political career at risk.

Add a third candidate who can, and the truth suddenly has a market. That is why there will never be a real candidate of fiscal sanity - on the debt, or on anything else that demands shared sacrifice or requires dealing powerfully with tradeoffs - until we eliminate plurality winners. In a marketplace with only two competitors, neither wins reelection if they do a hard thing - balancing the budget, reaching a bipartisan compromise on immigration, rethinking health care. So, they don't.

Healthy competition, in any human endeavor, delivers innovation, results, and accountability - all of which are sorely missing in our current politics. If we want the benefits of free market politics, we must tear down the barrier to entry that plurality winners create. The fix is simple: To win, you must earn a majority.

A preference for majority winners is neither radical nor new. The Constitution built in a safeguard for the Electoral College: If no candidate wins a majority there, the U.S. House picks the president in a "contingent" election. Massachusetts required a majority to elect its governor from 1780 until 1855. When no one won a majority outright, the choice fell not to the voters but to the state legislature.

A few states still use majority requirements today. Alabama, Arkansas, Georgia, Mississippi, North Carolina, Oklahoma, South Carolina, South Dakota, California, and Texas require majority winners in various races and use two-person runoffs to deliver those. The instinct is right. The mechanisms are the problem. Polarized legislatures breaking ties aren't acceptable today; that method does nothing to eliminate the deterrent effect of spoiler and wasted votes. Traditional runoffs are expensive, they demand a whole second election, and turnout collapses the second time around. Worse, a two-person runoff coming out of a crowded field can simply recreate the spoiler problem, as California's top-two primary has done - vote-splitting knocking out the majority's real choice before the final round.

The elegant answer is to hold runoffs instantly. Instant runoffs are mostly new to America, but they're time tested by other established democracies. The Australians and Irish have used them in various elections for more than a century. And, of course the idea of runoffs isn't foreign at all given their use in nine states. An instant runoff is exactly the same, except you don't have to come back to the polls for each new round. Instead, you rank the candidates from your first to last choice all at once (ideally on Election Day or in a mail-in ballot arriving by Election Day) using a ranked ballot.

After the polls close, assuming a dynamic five-person race, there are four runoff rounds.

1. In Round One, your vote is cast for your favorite candidate (i.e., the one you ranked first on your ballot) just like always. At the end of the round, the candidate who came in fifth/last place is eliminated.
2. In Round Two with four candidates remaining, your vote is cast for your favorite among the remaining four. At the end of the round, the candidate in fourth/last place is eliminated.
3. In Rounds Three and Four, the process repeats, narrowing the four to three and then three to the final two, at which point, of course, majority wins.

Here's the part people worry about, so let's be plain: In every round, your vote goes to your favorite candidate still in the race. As long as your first choice is standing, that's who you're voting for - round after round. Your lower rankings are just backups. They come into play only if your favorite is knocked out, and then your vote moves to the next name on your list who's still running. It's exactly what you'd do in a Georgia or Texas or Louisiana runoff: Your candidate didn't make it, so you pick your favorite among those who did. The difference is only that you expressed your preference in advance, so you didn't have to make the trip back to the polling place.

One election. Five candidates. Four instant runoff rounds. One vote for each voter in each round. A majority winner. No spoiler.

'Frenemies' of reform

Those of us pushing for "Final Five Elections" (FFE) know what the ranked ballot conjures in those who are unconvinced. In no small part this is because liberal reformers have spent years giving it a bad name. They've deployed it in sleepy, low-turnout, low-information municipal races, and in cities like San Francisco they asked voters to rank long rosters of little-known candidates.

Democratic Party reformers added ranked ballots to party primaries in New York City, but they deliberately didn't install it in the general election because the Democrats didn't want real competition in November. They prefer knowing who to call "Mr. Mayor" after the Democratic primary in July. Reformers also like to pair a ranked ballot with proportional representation. The first is basically sabotage; the second is just a terrible idea. In both cases, they're using a tool for the wrong job. The instant runoff has one narrow use case for which it is tailor-made: a November general election with a manageable field of up to five candidates. Used there, it does exactly one job impeccably - it guarantees a majority winner with no spoiler. It's the key that unlocks healthy competition.

That is precisely how we use it in Final Five Elections. FFE is the combination of two simple changes to our election system: First, a single-ballot primary open to every candidate and voter regardless of party, and out of which the top five advance regardless of party; and second, an instant-runoff general election resulting in a majority winner. Open the market; require a majority. That is the whole design, and it is not just theory.

In 2017, I published my politics-industry theory out of Harvard Business School with my co-author, economist Michael E. Porter. Our work made its way to Alaska, where prominent Anchorage attorney Scott Kendall used it to design a ballot initiative built around these new rules. In November 2020 Alaska voters passed Final Four Elections (an earlier version of Final Five Elections in which four candidates advance to the general). Alaska became the first state in the nation to choose healthy competition in its elections for Congress and its entire state government. It won't be the last.

You could be forgiven for thinking Final Five Elections are about electing more moderates. They will certainly make that more likely - the market for moderate dealmakers doesn't clear today, and moderates are essential for delivering consensus solutions to tough policy challenges. But unlike the reformers who imagine that's the whole point, I don't see it that way. Reforms that provide artificially disproportionate advantages for moderates (e.g., Condorcet winners) are a bad idea. Innovation in any human endeavor usually emerges from what might be considered fringes or extremes. It's the same for public policy where innovation rarely arises at the current midpoint of public opinion. As Porter and I wrote in 2017, "transformational changes in the U.S. have often begun at the fringes - in decidedly non-moderate camps." Think civil rights. We need moderates and we need "extremes." We need a competition of ideas. What Final Five Elections really does is let both markets clear at once - the market for dealmakers and the market for leaders and new ideas.

To envision what Final Five Elections would change, watch what's happening right now - then imagine the same candidates, the same voters, the same political mood, under different rules. This season, Democratic socialists won a string of Democratic primaries in places where the primary is the only election that matters. In Denver's safe-blue 1st District, 29-year-old Melat Kiros, backed by Bernie Sanders and the DSA, ousted 15-term Rep. Diana DeGette by more than 13 percentage points. In Upper Manhattan, Darializa Avila Chevalier knocked off five-term Rep. Adriano Espaillat. Because these are overwhelmingly Democratic seats, that small, committed primary electorate didn't merely choose a nominee - it chose the member of Congress even though the general election is still months away. General election voters who might have preferred the non-DSA Democrats will never get a say.

Now run those same races under Final Five Elections. The socialists would still claim a spot on the November ballot but they could no longer back into the seat as the only Democrat on offer, or as the lesser of two evils. To win, the socialist would have to assemble an actual majority of the entire district. The same logic runs on the right - which is why MAGA would still exist under Final Five Elections but would likely not have rendered establishment Republicans extinct. In Texas, John Cornyn led the first round of the Senate primary and still lost to Ken Paxton in a low-turnout runoff decided by the base - even as analysts judged Cornyn the stronger November candidate. In Louisiana, Bill Cassidy was eliminated by his own party's primary voters, punished for a vote of conscience against Donald Trump. Under Final Five Elections, Cornyn and Cassidy would each have stood on the November ballot beside their Trump-endorsed challenger (and the leading Democrat) and the whole electorate - not a closed-primary faction - would decide the race. If MAGA earns a majority, MAGA wins. If it doesn't, the establishment Republican, or an over-achieving Democrat, prevails.

To be clear, while I am no fan of the Democratic Socialists' platform, my objection is not that they might win, it's that we could back into their agenda - not because a majority of Americans chose it, but because a structural error in our democracy routinely distorts our elections. When and if DSA candidates win and their policies are tried in a laboratory of democracy (as in Mamdani's grand New York City experiment), I bet voters will discover what history has already shown: Socialism doesn't work.

Under Final Five Elections, voters would have a way back, because traditional Democrats wouldn't be extinct or new alternatives to the DSA would be able to enter. Under Final Five Elections, Mike Pence Republicans would have market access to compete for the post-Trump right-of-center vote. And for ideas that do work from any of these competitors, they can be adopted by other parties. I do this work because I believe in the value of competition. Even if certain candidates don't win, some of their good ideas might be adopted by those who do, a la Perot. That's as it should be.

In evaluating Final Five Elections, it's essential to see that it is not the sum of its parts. It is one machine whose several precision components work only in combination, engineered to deliver a single result: a majority winner drawn from a field of up to five credible candidates in November. Adopt just one component - ranked ballots, say, or some version of an "open" primary - and nothing structural moves. The piece that does the real work is the one most reformers omit: advancing five candidates from a single open primary into the general, so that the decisive, competitive election is November and not a low-turnout party primary.

Washington, D.C., shows what happens when that piece is missing. There, reformer Lisa Rice led an impressive campaign to pass Initiative 83, which put ranked ballots in both the primaries and the general and even opened those primaries to the District's independents - several of the "parts," adopted at once, with real skill and the best of intentions. But Rice's hands were tied by D.C.'s Home Rule Act which bars an essential piece - the top-five primary that would carry five candidates into a contested November - and so the dynamics of the election didn't change in Final Five style because party primaries still exist and each advance only one candidate to the general.

As a result, we saw a campaign similar to other DSA races: In June 2026, Councilmember Janeese Lewis George, a democratic socialist, won the Democratic mayoral primary and, in a city this blue, is all but certain to become mayor, with no credible contender waiting in the general. The primary still crowned the winner. Notice, too, what this reveals about the ranked ballot: In a low-turnout, low-information primary, ranking is an unnecessary complication. In Final Five Elections the primary is a simple "pick-one." You choose your single favorite, as always, and the top five advance; ranking does its real work later, in the general, where it forges a majority from genuine competition.

Opening the primary as a stand-alone reform, which is currently advocated by many major reform organizations, is not the missing piece either. The impulse behind it is understandable: If the party primary is the election that truly decides, then shutting independents out of it really is unfair. But the best cure for that unfairness is not to usher outsiders into a party's nomination; it is to make the general election the contest that matters, so that everyone is finally voting in the election that counts. Making a broken election system "fairer" is not the same as making it work, and we must not let the fix for a real unfairness talk us into a reform that leaves us just as unlikely, or more so, to get results.

Many reformers who have adopted my prescription for Final Five Elections nonetheless incorrectly suggest that FFE will weaken parties and describe that as a benefit. I believe those reformers are wrong on both counts. I am a fan of political parties, and, like esteemed political writer Jonathan Rauch, I want them strong - because in the industries that serve us best, you always find strong players. The trouble with our parties isn't that they're strong. It's that their strength is artificial. They are powerful in the one way no healthy competitor should ever be: They have demonstrated a nefarious talent for keeping rivals out of the market altogether. In the one place they ought to be strong - choosing the candidates who can actually win a November majority and deliver on the party's agenda - they've grown weak, even too weak for their own good or ours. The current system is why Mitch McConnell lamented "candidate quality" in 2022 when he didn't get the strongest general election candidates out of the Republican primaries. Separate the public function of the election from the parties' private one of choosing nominees, and we can finally afford to let the parties truly control their candidates, because the voters keep ultimate control at the ballot box. FFE is a win for (well-run) parties and for voters.

Now to the critics of Final Five Elections - and I have heard from a lot of you: You say it's a liberal plot. It isn't. Final Five forces every candidate, left and right, to win an honest majority. (For a strong proof point, in 2022 Nevada Democrats hired famed partisan lawyer Marc Elias to try to shut down FFE ballot initiatives, and defeating Final Five Elections was about the only thing the D and R parties agreed on in 2022 and 2024. Neither of them wants new competition.)

Critics also say it's too confusing. But surely Americans are as capable as the Australians and the Irish? And mainlanders as capable as Alaskans? You say it delays results. It doesn't. As long as the ballots are required to be submitted by Election Day and election authorities release the cast-vote record data, AP can call races on election night just like they do today. You say it's an incomprehensible algorithm. It isn't; you can use paper ballots, count manually and conduct a manual recount on any race if you want (though if you want results on Election Day, I'd suggest a computer). Used as a tool to support the emergence of the majority winner in a five-way general election, FFE is none of the things you say it is.

So here is my challenge. Don't just tell me what's wrong with Final Five Elections. Show me another plan that produces healthy competition of both candidates and ideas and the resulting benefits to customers, a.k.a. American citizens. If you do find a better one, I'll happily get on board with yours. But assuming you can't, it means that what the critics of FFE are really defending, whether they admit it or not, is the failed status quo - intense polarization, division and dysfunction, gridlock, party capture, and dismal policy results - over dynamic competition to solve problems. The United States became the most powerful and prosperous nation in human history for a reason we ignore at our peril: We unleashed free market-style competition and let it do its work. Competition is what drives our innovation. Competition is what lifted American life to a standard the world had never seen. America deserves the same exemplary results from free market politics.

And a special note to my conservative critics, chief among them the Wall Street Journal editorial page. You should be the last to need convincing. No entity has taught American readers more faithfully than you that market competition positively motivates incumbents and serves customers, and that artificial protectionist barriers to entry are the enemy of both.

Yet, you have been consistently hostile to Final Four Elections adopted by Alaska in 2020. Don't let the ranked ballot's abuse in the wrong hands blind you to its one indispensable use. Confined to a five- (or four-) candidate general election, the instant runoff does exactly one job: It demolishes the single greatest barrier to entry in American politics - the spoiler - and forces every candidate to win real competition on the merits. That is not a left-wing scheme (or a right-wing one). It is free markets for our republic, and it is the purest application of your own creed I can offer arriving, at last, in the one market where you have been strangely content to let a protectionist market thrive.

Our call to action goes out to all governors and state legislators. The Founders anticipated this moment and, in Article I, handed the power over the machinery of elections to the states. The Constitution provides that "the Times, Places and Manner of holding Elections... shall be prescribed in each State by the Legislature thereof." The rules of the game, for both state and congressional elections, are yours to write. Final Five Elections is not a pie-in-the-sky idea; it's actionable now, by any governor or legislature willing to lead. I can't imagine a better test case for laboratories of democracy than Final Five Elections in a handful of states. Over time, the results will create demand for expansionor - they won't. I'm betting on FFE.

But of course, governors and legislators can only do what their citizens ask of them. So here's to you citizens: It is crazy, when you actually stop and think, that we accept our current state of affairs as if we're powerless. The most detrimental driver of American politics is sitting in plain sight, and almost no one names it. Turn on the news and you'll hear endless coverage of the DSA's rise or MAGA's takeover treated as ideological weather and never as what they actually are: structural, the predictable product of party primaries and plurality rules.

Here's to you, journalists: It is crazy that the people whose whole job is to explain the world keep missing the one explanation that ties it together - that there are barriers to entry, and that those barriers, not the passions of the moment, are why we can no longer solve problems.

Here's to you, business leaders: You of all people should see this instantly, because it is your world exactly - a market, protected incumbents, competition strangled, customers ignored - and yet even you look right past it.

Here's to you, editorial boards, forever demanding better behavior from politicians while ignoring the rules that guarantee the behavior you claim to deplore: We do not need more outrage at the symptoms. We need people to finally understand the cause and then to do something about it. Because the extraordinary thing, once you see it, is that this is not rocket science. In the scheme of political challenges, it's not overwhelmingly hard. The fix is not a constitutional amendment. It does not require an act of Congress, or the consent of 50 states, or even two. A single state can adopt Final Five Elections on its own, through its legislature or by ballot initiative, at no cost to its neighbors and enormous benefit to its own citizens. As hard as our politics feels, this part is not that hard.

And to the frustrated business titans who keep circling this problem without solving it, this one is for you. Elon Musk, enraged at both parties, floated an "America Party." Howard Schultz, disgusted with the duopoly, explored an independent run. Mark Cuban tells all who will listen that both parties have failed us. Gentlemen: You are brilliant innovators, and you are misdiagnosing the problem. If this were your company, you would never pour a fortune into a doomed product line inside a rigged market. You would fix the market. That is the move here. Stop trying to win the broken game and start championing the rule change that ends its rigging for good. Put the same relentless, systems-level thinking that built your fortunes behind Final Five Elections in a few states, and you will do more for this country than any third-party campaign ever could. At the very least, Mr. Musk, don't fund the effort to repeal Final Four Voting in Alaska, the one state in which you could launch your new party without undue barriers. Give me a call. I think you've received bad counsel.

This has been a long argument. So let me reduce it to its essence - two images. In Image A, our current system, there is virtually no connection - no overlap at all - between our politicians solving problems in the public interest and the likelihood that they get reelected. Sit with that, because it is the whole tragedy in a single sentence: If America's elected representatives did their jobs the way we actually need them to, they would be more likely to lose those jobs (in their next low-turnout party primary) than to keep them. Congress doesn't solve problems because, under the current rules, solving problems is not a good way to win an election. In fact, it's a good way to lose one. No one would ever design a hiring-and-firing system like that on purpose. And yet here we are.

Final Five Elections does one essential thing: it creates the connection in Image B. It makes solving problems a good way to win - and to win again. Under these rules, what it takes to get elected finally overlaps with what it takes to serve the public interest, and in that overlap sits everything we have been missing: results and accountability. That overlap is the whole secret. Everything else in this essay - the open primary, the instant runoff, the majority winner, the end of the spoiler - is simply the machinery that produces it.

My passion may inadvertently suggest I'm presenting Final Five Elections as the gateway to a political utopia. It's not. I agree with Winston Churchill that "democracy is the worst form of government, except for all those other forms that have been tried from time to time..." Democracy is messy. It is hard. What we have now messy, hard, and bad results. With Final Five Elections, we'd still have messy and hard - but with some good results to show for it. That is utopia for democracy.

Katherine Gehl, former CEO of Gehl Foods, is the author of "The Politics Industry: How Political Innovation Can Break Partisan Gridlock and Save Our Democracy" and the architect of Final Five Elections.

Tyler Durden Sun, 08/23/2026 - 23:20

Evergrande Founder Gets Life But Homebuyers, Suppliers Bear The Costs Of China's Property Collapse

Authored by Michael Zhuang via The Epoch Times,

The sentencing of China Evergrande founder Hui Ka Yan to life in prison has brought a legal reckoning for one of the country's most spectacular corporate collapses. However, for hundreds of thousands of homebuyers, investors, and other creditors, the ruling does little to resolve the financial losses left behind by the property giant.

Xu Jiayin, also known as Hui Ka Yan, founder of property developer Evergrande, appears for sentencing at the Shenzhen Intermediate People's Court in Shenzhen, China, on Aug. 20, 2026. Shenzhen Intermediate People's Court /Xinhua via AP

Hui, the founder and former chairman of China Evergrande Group, was sentenced on Aug. 20 after being convicted of crimes including fundraising fraud and embezzlement. His personal assets were confiscated, while Evergrande and its property subsidiary were fined a combined 15.82 billion yuan ($2.35 billion).

Chinese authorities also ordered the continued recovery of illegal proceeds and repayment of losses where funds remain insufficient. Fifty-six other people involved in related Evergrande cases, including Hui's two sons, were given prison sentences ranging from 18 years to one year and 10 months, along with fines or asset confiscations.

Separately, on Aug. 21, the Guangzhou Intermediate People's Court accepted a bankruptcy-liquidation application against Evergrande Real Estate Group and appointed a liquidation team as administrator, according to an official court bankruptcy notice. Creditors are being directed to file claims in that proceeding.

The penalties, however, do not automatically compensate the people who lost money when Evergrande collapsed.

Evergrande reported total liabilities of 2.437 trillion yuan at the end of 2022, including 721.021 billion yuan in contract liabilities, of which 664.244 billion yuan related to property development. Reuters later cited Gavekal Dragonomics as estimating that Evergrande's advance payments from homebuyers were equivalent to about 600,000 housing units.

Davy Jun Huang, a U.S.-based economist and former columnist for Chinese state media outlet CNTV, told The Epoch Times that Hui's life sentence answers the question of who committed crimes, but does not answer who should bear responsibility for Evergrande's enormous debts and unfinished projects.

"These are two completely different questions," Huang said. "The harsher Hui Ka Yan is punished, visually it feels like the problem has been solved, but in reality, the houses will not automatically be completed because of this, and creditors' money will not be recovered because Hui Ka Yan has been sentenced."

The question of who ultimately absorbs Evergrande's losses is likely to remain more consequential for ordinary Chinese than Hui's punishment.

Who Will Pay?

Evergrande's collapse has left losses spread among several groups, including homebuyers, suppliers, banks, investors, and other creditors.

Huang argued that the fines imposed on Evergrande and its property subsidiary do not themselves amount to direct compensation for homebuyers or unfinished projects. An official Supreme People's Court summary adds an important qualification: restitution for losses takes priority over enforcement of fines and confiscation, while illegal proceeds are to be recovered and any shortfall is subject to restitution. Huang argued that the losses from Evergrande had effectively been distributed throughout society among homebuyers, suppliers, and investors.

This has fueled broader debate over whether the regime should use other revenues associated with the property sector to compensate victims.

Huang said such demands were reasonable from both legal and economic perspectives. He pointed to the U.S. government's 2008 intervention in Fannie Mae and Freddie Mac as an example of the government assuming responsibility when a major part of the housing finance system was threatened.

China's regime, he said, played multiple roles in the property boom, as the dominant supplier of land, regulator, and major beneficiary of property-related revenue, but did not assume the corresponding losses when the market collapsed.

"When real estate was rising, the government used land-sale revenues, land-transfer taxes, and layers of extraction to squeeze out the last penny," Huang said. "When the real estate bubble burst, under the Chinese Communist Party's (CCP) political model, the government would not bear any of the losses."

The halted under-construction Evergrande Cultural Tourism City in Taicang, Suzhou city, in China's eastern Jiangsu Province, on Sept. 17, 2021. Vivian Lin/AFP via Getty Images Suppliers Face Steep Losses

The impact of Evergrande's collapse extends well beyond unfinished apartment complexes.

Xu Zhen, a senior professional in China's capital markets, told The Epoch Times that China's local governments were among the biggest beneficiaries of Evergrande's expansion. He estimated that local governments collected roughly 1.2 trillion to 1.7 trillion yuan ($180 billion to $250 billion) in land-sale revenues and taxes directly associated with Evergrande between 2016 and 2021.

That money had already entered regime coffers and would not be affected by Evergrande's bankruptcy or Hui's imprisonment, Xu said.

Xu also argued that state finances would benefit from the penalties. That point is subject to the judgment's express restitution priority, which can affect the order in which recoveries are enforced.

Banks initially benefited from lending to Evergrande but later became creditors themselves. Some of their claims were eventually sold at steep discounts after the company's collapse. Xu cited a claim held by China Minsheng Bank that was ultimately sold for roughly 13.5 percent of its original value.

Homebuyers have faced a different kind of loss - years of waiting while continuing to carry mortgages on homes they may not be able to occupy.

However, Xu identified suppliers as the group that suffered the most severe financial damage.

Under a 2023 Supreme People's Court interpretation, qualifying consumers who bought homes for residential use can, if statutory conditions are met, assert delivery or refund claims ahead of construction-price priority claims, mortgages, and other claims. Construction contractors and secured creditors otherwise retain separate priority rights. Evergrande's June 2023 interim results reported 1.05657 trillion yuan in trade and other payables, including 596.17 billion yuan in construction-material payables.

The debts affected thousands of small and medium-sized companies, many of which had limited bargaining power and few legal resources.

Some construction contractors and materials suppliers collapsed after failing to collect commercial bills issued by Evergrande. In the liquidation of an Evergrande project company in Zhanjiang, ordinary creditors ultimately received a recovery rate of about 0.69 percent, according to Chinese financial reports; Reuters also cited the figure in April 2026.

Evergrande said its targeted wealth-management financing products totaled approximately 92.1 billion yuan, with about 34 billion yuan in unpaid principal and interest as of the end of 2022. Separately, Reuters reported in 2021, citing an Evergrande Wealth sales manager, that more than 80,000 people had bought wealth-management products that raised more than 100 billion yuan over five years.

Evergrande's shares have also been delisted, leaving many retail investors with substantial losses.

Construction workers rent shared bicycles as they leave a building site for a new office tower in the Central Business District of Beijing on April 3, 2025. Kevin Frayer/Getty Images A Boom Built on Political Ties

The collapse has also revived questions about how Evergrande grew so rapidly in the first place.

Taiwan-based Japanese journalist Akio Yaita, a prominent critic of the CCP, told The Epoch Times that the company's downfall was not simply the result of excessive leverage and a bursting property bubble. He said it exposed deeper problems in China's system of political and business relationships.

As long as entrepreneurs maintained strong political connections, Yaita said, access to land, regulatory approvals, and financing becomes much easier. Rising property prices then allowed companies to expand rapidly.

However, such a model was inherently vulnerable to changes in political power, he said.

"China's system makes it difficult to produce people like Konosuke Matsushita, YK Pao, and Morris Chang, who build corporate culture and industrial foundations over decades, and it is also difficult to produce entrepreneurs like Elon Musk and Jensen Huang, who rely on technological innovation to change the global industrial landscape," Yaita said.

Instead, he said, the system was more likely to produce entrepreneurs who rose rapidly through political connections and then fell just as quickly when those political relationships changed.

Huang described Evergrande's rise as a form of mutually beneficial cooperation between business and the regime.

During the property boom, he said, developers helped local governments generate land revenue and economic growth, while banks expanded lending and met credit targets. The interests of developers, banks, and government officials were therefore aligned.

Huang said he visited Evergrande's headquarters in 2018 to give a lecture on policy analysis and forecasting and warned Hui that the company should stop expanding after 2018. Hui and the company did not heed the warning, he said.

That does not absolve Evergrande or Hui of responsibility, Huang said.

However, the collapse illustrates a broader problem. According to Xu, private property developers can become highly dependent on a system in which land and access to capital are heavily controlled by the state.

"From an employee to a scapegoat is the fate of private real estate owners under the CCP's monopoly over land and capital," Xu said. "Hui Ka Yan is a typical example."

"If you do well, the CCP lets you gain both fame and fortune; if you do badly, it makes you a prisoner," he said.

Hui's imprisonment therefore does not end the questions raised by Evergrande's collapse. For the company's former customers and creditors, the larger issue remains who will ultimately bear the cost and whether any of the money and homes lost in the collapse can be recovered.

Tang Bing and Luo Ya contributed to this report.

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Tyler Durden Sun, 08/23/2026 - 22:45

Has Trump Turned The Tables On Iran - Or Is Another Round Of War Coming?

Authored by Trita Parsi via Antiwar.com, reprinted with permission from Trita Parsi's Substack.

The Trump administration believes it has turned the tables on Iran. Washington assesses that the rerouting of maritime traffic through the Omani corridor, combined with a global shift away from Persian Gulf oil, has reduced the effectiveness of Tehran's closure of the Strait of Hormuz. At the same time, the U.S. blockade has sharply constrained Iran's ability to sell its oil. The result, in Washington's view, is a status quo that imposes greater costs on Iran than on the United States.

That calculation changes the strategic equation. Rather than being forced to accommodate Iranian demands, President Donald Trump now believes he can afford to wait Tehran out. For the first time since the war began, the White House has concluded, time is working in America's favor.

Assuming that assessment is correct, the more important question is what Trump intends to do with this newfound leverage. If Washington interprets Iran's vulnerability as an opportunity to extract capitulation rather than to negotiate a durable settlement, the result is more likely to be another round of war than an end to the conflict. Tehran has already demonstrated that when confronted with a choice between surrender and escalation, it will choose the latter. Giving Iran the same choice again is therefore unlikely to produce a different outcome.

The only way to turn this unexpected shift in the balance of leverage into a political victory is through diplomacy. If Washington's assessment is correct, it now has an opportunity to use its leverage to secure a compromise that addresses its core interests while giving Tehran sufficient reason to accept an agreement. If, instead, the administration pursues maximalist demands, it risks converting a moment of leverage into another cycle of war.

Historically, however, Washington has tended to make precisely this mistake. Whenever U.S. policymakers have concluded that time and leverage are on their side, they have often treated Iranian weakness not as an opening for compromise, but as an opportunity to seek capitulation. The danger is that Trump will repeat that pattern. He will mistake leverage for victory and turn a potentially favorable negotiating position into the continuation of the tragedy that is US-Iran relations.

Trump failed militarily, but thinks he can win economically

America has run out of military options. The clearest indication is that the Trump administration has stopped striking Iranian targets even as Tehran continues to attack ships transiting the Strait. On Monday, an Iranian attack killed a sailor aboard a vessel using the southern corridor. Yet Washington did not respond militarily - even though the second round of the war began precisely because the administration had declared that it could not accept Iran firing on ships.

According to Reuters, U.S. forces have used virtually all of their global stockpile of ATACMS and Precision Strike Missiles (PrSM) during the five-month Iran conflict. Moreover, roughly 65% of Patriot interceptors, 38% of THAAD interceptors, and almost half of the Navy's Tomahawk cruise missiles have been expended.

The depletion of these stocks appears to have forced Trump to abandon its pursuit of a military knockout and instead shift the burden of economic pressure onto Tehran. That strategy, in turn, appears to be producing results faster - and to a greater degree - than the administration anticipated.

In the American description of events, this success is mainly due to three factors: New, much larger ships are being used that carry primarily crude oil. These VLCCs (Very Large Crude Carrier) can carry up to 2 million barrels of oil. In comparison, other oil tankers can transport between 350,000 and 1 million barrels.

Before the outbreak of the war, approximately 21 million barrels of petroleum and crude oil passed through the Strait of Hormuz on a daily basis. These were carried by 65 to 80 tankers. Roughly the same amount of oil transition through the strait can now be achieved by only ten VLCCs a day. And given that the vast majority of ships transitioning through the Strait in the Southern Corridor have their transponders off, this traffic has not been noted by outlets tracking the traffic.

Secondly, demand for Persian Gulf oil has significantly dropped as numerous economies have started to transition to other sources of supply. Brazil, for instance, has increased its exports and started to serve markets that previously relied on Persian Gulf oil. Most importantly, Beijing appears to have deliberately reduced its oil consumption to prevent prices from remaining above $100 a barrel and thereby aggravating the risk of a global recession.

Third, the war has created economic incentives strong enough to attract ships and crews willing to assume substantially greater risks. The growing volume of traffic through the Southern Corridor, despite the obvious dangers, is evidence that these incentives are surprisingly powerful.

Unlike its earlier illusions about the blockade as a guaranteed knockout blow against the Iranian theocracy, Washington no longer expects economic pressure to produce a quick surrender. Instead, the administration appears to be betting on a slower process of economic strangulation that will eventually force Tehran to capitulate. Faith in a knockout blow has given way to the more fragile hope of prolonged strangulation.

Tehran isn't worried - for now

Iran's calculation is effectively the opposite of Washington's. Tehran doubts the United States can sustain the flow of VLCC traffic through the Strait and believes Trump will have little choice but to return to the Islamabad MOU within the next two to three weeks. Trump may have made progress on oil exports, but LNG and many petrochemical products, including fertilizers, remain unable to leave the Persian Gulf.

Tehran also appears to believe that it retains the ability to halt the VLCC traffic, but is deliberately refraining from doing so for now. The calculation is to avoid escalation while waiting to see whether the United States' depleted military options ultimately compel Trump to return to the MOU.

In short, Tehran does not appear overly concerned - for now. But that could change. If Trump refuses to return to the MOU, or succeeds in turning the balance of economic pain against Iran, Tehran will face a far harsher reality. Just as Washington underestimated Iran's resilience, Tehran may have underestimated the both resilience of the global economy and Trump - the former's ability to shift away from oil and the latter's craftiness in finding non-military ways to effectively reopen parts of the Strait.

Between surrender or escalation, Iran will almost certainly choose escalation. Even if Trump has gained the economic upper hand, Tehran still believes it holds a military advantage. Its options range from more aggressive attacks on VLCCs to strikes on Emirati pipelines that bypass the Strait, and potentially to renewed escalation in the Red Sea.

Indeed, it was precisely Trump's erroneous assumption that Iran would choose surrender over war that helped drive the United States toward escalation in the first place. Washington's recurring search for Iran's breaking point has repeatedly produced escalation rather than capitulation. There is little reason to expect the pattern to be different this time.

The US-Iran tragedy

Herein lies the tragedy of the lethal dance between Washington and Tehran. America's winner-take-all approach makes agreement unacceptable when Iran has the momentum. When the momentum shifts to Washington, the United States comes to believe that nothing short of Tehran's full capitulation is palpable.

Because Iran fears surrender more than war, the cycle oscillates between economic pressure and military escalation, interrupted only by brief and often fragile periods of diplomacy. Put simply, the structure of the situation favors war.

This is particularly visible today as neither side is investing in any real diplomacy with the other. Tehran's "diplomacy" is to simply wait for Trump to return to the MOU, while Trump has barred U.S. officials from engaging with Iran and committed himself instead to economic warfare.

When you don't negotiate when you're weak, because you are weak, and you don't negotiate when you are strong, because you are strong, then war becomes the baseline.

Trita Parsi is the Executive VP of the Quincy Institute for Responsible Statecraft and an award-winning author. Washingtonian Magazine has named him one of the 25 most influential voices on foreign policy. Noam Chomsky calls him "one of the most distinguished scholars on Iran"

Tyler Durden Sun, 08/23/2026 - 22:10

Assassination Sing-A-Long: Hasan Piker Mocks The Murdered Charlie Kirk To Cheering Crowd

Authored by Jonathan Turley via Jonathan Turley,

We have seen protesters on the left around the country mocking the assassination of Charlie Kirk, even reenacting his murder. Hate traffickers like Jennifer Welch have even justified his assassination. It is all shocking and depressing, but none reached the level of Hasan Piker leading a huge crowd in mocking Kirk and his faith. Before he was murdered, Kirk debated Piker and called him a "socialist hypocrite." What is shocking is not the utter depravity and cruelty of Piker, but the ecstasy of the crowd in relishing the death of someone with opposing views. It is part of the conditioning in what I have previously called an "age of rage."

In the video, Piker leads the crowd in the meme song "We Are Charlie Kirk" at a stop of his "Fear& LIVE" tour, including such lines as "We are Charlie Kirk, we carry the flame. We'll fight for the Gospel, we'll honor his name." His co-hosts and the crowd seem to be laughing with joy.

Joining him at this hatefest at the Golden Gate Theatre in San Francisco on August 21 were reportedly Will Neff, QTCinderella, and AustinShow.

Hasan is wearing his now-signature Mao jacket as the young crowd and his co-hosts laugh hysterically. It is the very essence of this movement to desensitize people, particularly young people, to violence and hate.

In Rage and the Republic, I wrote about this national ragefest. It allows people to hate completely and without thought to the humanity of those being hurt. What people will not admit is that they like it. Rage is addictive, and it is contagious. Just look at the crowd in San Francisco, and you will see the addictive quality of uncut, undiluted hate:

Piker, Will Neff, QTCinderella, AustinShow, and these fans have every right to spread hate. It is protected speech just as KKK and neo-Nazi groups are allowed to promulgate their own hateful values.

What is exasperating is how hatemongers on the left want to enjoy hate speech while accusing others of hate and intolerance. They do so by excusing their actions or views by demonizing those who disagree. Democratic leaders continue the false claim that democracy is dying in America and that this may be our last free election. While made over multiple elections, the claim of the imminent death of democracy (unless they are elected) does not appear to register with their supporters.

Recently the rhetoric has reached hysterical levels. Florida Democratic Senate candidate Angie Nixon has compared Immigration and Customs Enforcement agents to "modern-day slave catchers" and the government is "literally trying to kill us."

It is a narrative that allows you to speak like a Nazi while claiming to be fighting Nazis.

Piker thrilled the crowd by mocking a murdered man over his faith and his death. It is more than being simply classless. It is commodifying rage. Piker is reportedly raking in a fortune as are other hatemongers like Jennifer Welch. They traffic in rage to a nation of rage addicts.

It is a scene that only reaffirms the work of Kirk who sought to expose the hate and intolerance of the left, particularly on our campuses. Kirk infuriated many by challenging them to debate. There is no room for reason in an age of rage. Those who try to introduce opposing views on campuses are cancelled or attacked.

Recently, a group of pro-life teenagers were kicked out of the Wydaho Roasters coffee shop in Idaho by an owner who found their presence intolerable. At universities, faculty members have attacked displays and even students in righteous rage. One professor who pleaded guilty to assaulting pro-life students was not only attained on the faculty but even honored by another school.

Civility, and even humanity, become signs of weakness in these times. They gravitate to figures like Abdul El-Sayed who has campaigned with Piker and promises to "choke out" Republicans and refers to moderates like Pennsylvania Sen. John Fetterman (D) as ogres to have their heads cut off and put on pikes.

The American left has found their berserkers, the old Norse warriors who were known to fight in a virtual violent trance. The new berserkers offer the chance to hate completely and without remorse or reflection. Over time, supporters are conditioned to disregard even the murder of those with opposing views. As shown in San Francisco, assassination becomes nothing more than a sing-a-long in an age of rage.

Jonathan Turley is a law professor and the best-selling author of "Rage and the Republic: The Unfinished Story of the American Revolution."

Tyler Durden Sun, 08/23/2026 - 21:00