Weekend reading links

1. Foreign capital flows into US equities even as they slow down and even reverse in the debt markets. 

Foreign investors made a record $942bn in net purchases of US equities and investment fund shares in the 12 months to July, accelerating a shift in overseas investment towards American stocks and away from debt. The flows represented the highest rolling 12-month total in Treasury data going back to 1985. Net purchases of US equities and investment fund shares by foreign investors jumped to $426bn in the second quarter, up 62 per cent from the same period in 2025, and surpassing the previous quarterly record of $299bn in 2022, according to the Bureau of Economic Analysis... The foreign inflows coincided with a gain of about 20 per cent for Wall Street’s benchmark S&P 500 in the year to July... Foreign demand for US debt moved in the opposite direction. Overseas investors bought a net $188bn of US debt securities in the second quarter, down from $314bn in the first. That came as China’s reported holdings of US Treasuries fell to $618bn, their lowest level since August 2008, as Beijing diversifies into gold, agency bonds and other assets.

2. Markets step in to correct state capability failures - judicial delays edition.

The country suffers from one of the world’s largest judicial backlogs, approximately 54 million pending cases, and inside many of them is big money that one party owes another, that the claimants can’t afford to pursue through years of litigation. An investor could identify favourable cases, fund the legal proceedings, and keep a percentage of the claim if they won. Pool enough of these claims together and it looks something like a private equity fund, except the underlying asset is the claim to a future payout rather than ownership in a company. 

Cut to January 2026, and Kundan Shahi’s litigation company, Legalpay, has committed Rs 100 crore over the next 18 months to financing commercial and insolvency disputes. The firm has already worked with the likes of Zepto, Pwc, and Deloitte and claims to deliver returns exceeding 30% internal rate of return (IRR) to its investors... From the US and UK to Hong Kong, Singapore, and Australia, third-party litigation funding has matured into a fully-fledged asset class, with the former president of the UK Supreme Court calling it “the lifeblood of the justice system”... Burford Capital, listed on the NYSE and LSE, manages a 7.5 billion dollar portfolio of legal claims and claims to have delivered a 26% IRR on concluded cases over 15 years... In May 2026, Five Rivers Capital, a Mumbai firm backed by a global legal finance company, surfaced as the first Indian litigation finance vehicle registered with Sebi as a Category II AIF. The firm is reportedly in talks to raise about $25–$50 million, though it has yet to close the fund or deploy any capital.

3. Attracting foreign universities to establish campus in India has for long been the target of attention for state governments. Now that 17 universities have set up shop, the demand side weaknesses are becoming apparent. 

In its second year, Deakin University had all of 46 students. Another Australian university, Wollongong, started its India campus with just nine students in 2024 and added 19 more in the second year. Considering the bar for entry is the bare minimum—there is no entrance exam for a start—those are dismal numbers. The reasons aren’t hard to fathom. Indian students looking to study abroad broadly fall into two categories. They either want an education from a prestigious institution or they desire to leave the country and see a student visa as an easier way out. The universities establishing campuses in India don’t cater for either.

“I don’t see these universities bringing any cutting-edge programmes here. It’s more of the same,” says a study-abroad consultant who works with some of them. “There are computer science and business courses that attract a certain student, but they aren’t creating programmes that you don’t usually find in India, like quantum computing or spacetech.” If the country hoped that foreign universities would bring world-class research or future-facing tech to India, it might be disappointed. The “lab-lite” courses they offer are cheap to run and easy to scale, allowing them to operate out of corporate complexes rather than expansive campuses. It’s a low-risk, high-margin play. They promise a degree stamped with a “top 500” brand name but without the research-intensive environment that made it a brand in the first place. And yet, they aren’t cheap. A master’s degree from one of these universities costs Rs 15–25 lakh a year. At that pricing, they have competitors to deal with.

4. Excellent long read from Gill Plimmer on how the privatised UK water utilities have skimped on investments and discharged untreated water into the country's rivers polluting and making them toxic. 

Just eight days after Macquarie sold its final stake in Thames Water in March 2017 — leaving behind a debt pile that had grown to £10.8bn — Thames Water received a then-record £20.3mn fine for allowing 1.4bn litres of raw sewage to flow into the River Thames. The untreated effluent had entered the river at six different sites in Oxfordshire and Buckinghamshire, suffocating bream and trout, killing herons and waterfowl, and putting boating companies out of business... Thames Water had been dumping sewage to save money on maintenance during a period when investors received big dividends and its executives huge salaries. No one was held to account. The company’s chief executive, Martin Baggs, had left six months earlier and before the court case started with a £2mn pay package. Baggs went on to join the board of Thames 21 — a non-profit that protects the river... Between 1991 and March 2025, the 16 privatised water monopolies raised a staggering £82bn in debt while simultaneously paying out £85bn in dividends to their shareholders, according to research by the FT.

5. Robin Wigglesworth has a very good long read on the repo markets, which he describes as being similar to the dark matter in astrophysics.

The repo market is often described as the plumbing of finance. Like the pipes around your house, it ensures that money flows from where it is abundant to where it is needed. And if it breaks down, then things quickly get smelly... It is huge, powerful and omnipresent, and most easily observed through its impact on other bodies... the US Treasury calculates that the US market alone is now roughly $12.6tn, and the International Capital Markets Association, a trade body, recently estimated that the European repo market stands at almost €14tn... when it very occasionally comes under pressure, it is enormously unsettling to the rest of the financial universe.

6.  Private equity has become the lightning rod for housing supply crunch in the US during the mid-term elections, on the back of rising home purchases by firms in recent years.

7. Tej Parikh points to an India shock arising from the large and rising pool of migrants from India. The country is the largest contributor to migrants, 18.5 million globally in 2024, and making 70% of all US H1-B beneficiaries. 

These migrants contributed $150 billion in remittances in 2025, or 3% of GDP. 

Such large migrants invariably invites discontent in these times.

Indeed, anti-Indian sentiment is on the rise. Just this month, the Republican nominee for a seat on Texas’s oil and gas regulator sparked allegations of racism for a social media post aimed at South Asian students. Last year, Indian-origin migrants were explicitly targeted in “March for Australia” rallies. Anti-South Asian slurs in online spaces in the US have also surged. The backlash could hinder the Modi government’s strategy. As it happens, US President Donald Trump has raised scrutiny of and fees for H-1B visas.

8. Very good article about the Gurugram story.  

As of June, Gurugram housed North India’s largest office space, with 100 million square feet built and counting. The who’s who of global MNCs — Apple, Google, Microsoft, Amazon — have a presence here, if not their India headquarters... the data shows that Gurugram’s share in Haryana’s employment in the organised sector has risen from 17.35 per cent in FY06 to 67.62 per cent in FY24, meaning that roughly two in every three organised-sector jobs in Haryana sat inside this one district... Gurugram made up 1.2 per cent of the total number of shops and commercial establishments in Haryana in 2006, which ballooned to 13.51 per cent in 2024. It also made up 67 per cent of the people employed in these sectors in 2024, versus about 26 per cent in 2006.

9. Good graphical feature on PE's problem of exits.

The private equity sector is managing a record $4.7tn in assets. But a growing portion of these assets are unsold companies, an increasing share of which have been held for five years or more. The median holding time is a record seven years. Most unspent capital, or "dry powder", was raised before 2024.

This has caused the distribution of cash to its investors to plunge since 2021.

And the share of exits through continuation funds (dedicated pools of cash from new investors to buy companies from themselves) has climbed sharply.

10. Nvidia announces the biggest share buyback in history worth $150 bn, beating Apple's record $110 bn in 2024.

11. Solar plus battery convergence with thermal power in India.

Solar Energy Corporation of India (SECI) ran an auction to buy electricity capacity where they (SECI) demanded the availability of a thermal generator. A bidder who plans to use solar or wind is then forced to load up with the batteries required, to charge in the day, so as to deliver thermal-style availability. This auction discovered a price of ₹5.25 per kWh, guaranteed for 25 years. It is hard to identify a single comparable price for coal thermal in India because coal-extraction rights are given by the state in non-market ways. But if we look at recent new coal-power contracts in India, they are priced at ₹5.38-6.30 a unit. The SECI-discovered thermal-mimicking price for renewable power is now 10 per cent cheaper than that for new coal.

12. This makes great sense, and is something this blog has been advocating, especially the demand-side creation, for India's semiconductor chip design ambitions. 

What is missing is capital that funds Indian fabless companies all the way to commercial tape-out, not just prototypes. DLI must be expanded. ISM 2.0 should create a Chip Design Commercialisation Fund at Rs 1,000-crore scale — modelled on NIIF — and designate at least two sovereign AI inference chip programmes with guaranteed government offtake. Those two changes, delivered in the next budget, would do more for India’s semiconductor future than more wire-bond packaging projects.

13. Surjit Bhalla says that India's external linkages in terms of FDI and FPI look dismal.

In 2025-26 India recorded a record FDI inflow of $94.5 billion. In the same year, foreign investors repatriated or disinvested $53.6 billion, leaving $40.9 billion. Indian firms invested $33.3 billion abroad. Net foreign direct investment — just $7.65 billion. About 0.18 per cent of GDP — and that is the good news, being a recovery from 0.02 per cent in 2024-25. Still the second-lowest in three decades... Reinvested earnings of foreign firms — profits earned here and not taken home, a figure not part of India’s FDI statistics until the definition changed in 2000-01 — were $25.6 billion in 2025-26, more than three times net FDI. Retained earnings are not a new commitment to India... In 2025, Indian equities underperformed emerging markets by the widest margin since 1993, and trailed Asia-Pacific by the most since 1998. Foreigners withdrew $17.7 billion. This year till August 19, India was down 9.1 per cent in dollar terms while emerging markets were up 20.6 — a gap of 30 percentage points in under eight months. Korea was up 77.6 per cent, Taiwan 58. Another $10.5 billion has left.

14. Graphical explanation of why the US Treasury Bonds are climbing,

15. Starbucks was once hailed as a poster child for ESG practices. In a remarkable reversal, it has now scaled back or scrapped its green goals and fired sustainability staff. 

The coffee shop chain has revised or dropped pledges to halve water use and waste, while a goal to cut carbon emissions by 50 per cent is under review. The pullback comes amid a broader US corporate retreat from environmental commitments as political pressure rose under President Donald Trump and ambitious targets prove hard to meet. But Starbucks stands out because few companies made sustainability so central to their corporate identity. The Seattle-based group announced its targets in 2020, when then chief executive Kevin Johnson declared in a public letter that “sustainability has been at Starbucks’ core since the beginning and consistent with our belief that we can build a great business that scales for good”. The letter, which pledged transparency about its progress, is no longer on the company’s website, while many targets were absent or amended in Starbucks’ annual Global Impact Report published this summer.

16. Good NYT article on how Asia managed to survive the Iran war till date. This is how India managed to maintain oil supplies.

And this is how the natural gas supplies were substituted.

Weekend reading links

1. China's effect on solar power in a graphic.

At the turn of the millennium, solar panels cost $5-$6 per watt of generation capacity. Today, they sell for around 12 cents per watt, a level described as “offensively cheap” by Dave Jones, co-founder of think-tank Ember. That reduction is entirely the result of an explosion in China’s production capacity, which, according to research firm Wood Mackenzie, stands at roughly 1.36 terawatts, even as Beijing tries to rein in output to combat price deflation.

And rooftop solar generation is causing a loss of good customers across utilities, triggering a 'utility death spiral'. 

Shoprite, Africa’s biggest supermarket group, says the company could “power an entire suburb” with the panels it has been installing on its roofs and trucks in South Africa and Namibia since 2015. But what has been good for Shoprite, which now has around 43MW of peak capacity at its disposal and is looking at battery storage, constitutes a problem for state power utility Eskom. It estimates that rooftop solar panels and batteries, mostly installed by businesses and wealthier customers in response to years of rolling blackouts, were responsible for around 7 per cent of the 11.7 terawatt-hour reduction in its electricity sales for the year ending March, compounding a sharp fall in industrial use exacerbated by high prices. 

The lower revenues come as Eskom needs to fund the upkeep of the grid, which allows households to export electricity during the day, and the power stations that fill the generation gap when it’s dark or cloudy, or when power stored in batteries is insufficient to meet demand. “Everyone who has rooftop solar in any major city, they are still connected to the grid,” says its chief executive, Dan Marokane. “Three weeks ago . . . the whole country had to rely on Eskom generation for three days,” he adds, due to prolonged cloudy weather slashing output from rooftop panels... In Australia, operators of the high-voltage transmission system have grappled with too little demand as consumers draw power from their rooftop panels rather than the grid. Very low demand can make it harder to run certain power plants needed to keep the whole system stable.

2. AI is transforming warfare, and the Russia-Ukraine war is the testing ground for these technologies. 

AI technology has changed how the war in Ukraine is fought. At the start of the conflict it could take 20 minutes to identify a target and launch a strike. Now that process can take less than two minutes, sometimes just seconds... When militaries talk about AI, they are not talking about a single system. They are referring to software being used at different stages of warfare — collecting and processing data, helping commanders identify and prioritise targets and allowing drones to keep operating when communications are jammed. AI-enabled software can process “mass data at a scale, a speed that human staff officers can’t do”, says Anthony King, professor of war studies and director of the University of Exeter’s Strategy and Security Institute. Rather than altering the sharp end of a conflict, King says the primary function of AI has been to improve “situational awareness and intelligence”. The technology can help commanders make battlefield predictions, from the sustainability of a campaign to the rate at which munitions are being depleted.

3. What are the fiscal costs of immigrants?

The UK's comparatively low rates of tax and social insurance contributions for low-paid workers plus a relatively flat state pension mean that people (immigrant or otherwise) who do small amounts of paid work or remain on low incomes contribute little to the exchequer but still benefit from robust state support. In Germany or France’s fiscal systems, someone with the same weak employment and earnings patterns would generate much larger receipts from tax and social insurance due to the flatter tax regime, and would receive a comparatively smaller pension since these are linked more tightly to lifetime earnings.

The result is that in order to be a net fiscal contributor over their lifetime, the average couple arriving in the UK at age 30 needs the primary earner to have a salary at the 55th percentile of the overall earnings distribution, compared to the 45th in France and 28th in Germany. This is according to a new working paper on the fiscal impacts of immigration in different European countries by Usama Polani, a researcher at the Stanford Institute for Economic and Policy Research. Put another way, for immigration to be financially beneficial to the state, the UK needs to attract migrants with much higher pay and rates of employment than its peers.

4. The government seeks to restructure the governance of the storied Indian Statistical Institute (ISI). 

The ISI Bill 2026 seeks to repeal the earlier ISI Act 1959, changing the institute’s status from a registered society to a body corporate. This would replace its 1,800-plus-member general body and 33-member board with an 11-member board, with seven members aligned with the government and four representing ISI... The new board will be leaner by a factor of three: the President of India will be the visitor and will appoint the chairperson as well as four experts of her choice, joined by two representatives from Mospi. The four remaining members will come from ISI... The academic council, which discusses general syllabi, the number of students to be admitted, and new courses, has so far comprised all ISI professors, representatives from all constituencies, and the director as chairperson. The new bill changes that. Under it, the academic council is reduced to a small body, mostly made up of government representatives. The dean of studies is not a part of this council in the proposed bill.

5. Oil prices over the last fifty years.

Oil production is also less concentrated in the Middle East. The US is now the world’s largest producer, ensuring it will not have a supply shortage, and Canada, Brazil, Guyana, Venezuela have all increased production during the Iran crisis. More importantly, a barrel of oil matters less to the global economy than it used to. Oil’s share of global energy demand has fallen below 30 per cent from a peak of 46 per cent half a century ago. At the same time, the amount of energy needed to produce a unit of GDP has fallen by more than a third since 1990. Ben May, head of global macroeconomic research at Oxford Economics, says the inflationary impact of the Iran war has been dulled because “we went into the crisis with favourable oil supply” at a time when overall economic demand was “steady rather than spectacular”. When the war began, by contrast with the 1970s energy shock, the world had strategic reserves, an oil glut and growing supplies of liquefied natural gas, and a sophisticated trading system in which thousands of tankers criss-crossed the globe.

6.  NYT has this investigation of how online gambling giant DraftKings is using algorithms to target gamblers who are likely to lose the most.

So in 2023, DraftKings took customer betting records and built a machine learning model, a form of artificial intelligence that seeks patterns in data, to answer the question: Who was more likely to respond to promotions by gambling — and losing — more?... DraftKings makes money when gamblers lose money. And the model sought to identify those it could get to lose the most. It scored each customer based on their habits: The higher the score, the more money a gambler was likely to lose for each promotion offered... DraftKings has continued to hone its methods, using data science, to target losing gamblers with promotions that encourage more betting, according to six former employees who worked on them. 

At the same time, four other former employees said, DraftKings has stalled or squashed efforts to use similar technology to predict who might develop a gambling problem based on their betting activity... documents show how the model... analyzed dozens of data points for each gambler, including how frequently they played, their daily account balances and how much they typically lost compared with how much they bet. It also incorporated another model that calculated how likely a user was to stop gambling. This betting data may also contain signs that a person is headed for trouble. Yet when employees developed a machine learning model that would have assigned users “risk scores,” the company sidelined it, according to two former employees who worked on that project...

Promotions, which take on forms like a free bet, a “profit boost” or a deposit bonus, play a vital role in DraftKings’s business: The company brought in around $8.7 billion in gross revenue from sports and casino gamblers last year, and gave out about $3 billion in promotions, according to research by Citizens Bank... they were effective because they take advantage of gamblers’ psychology. “I feel I’m getting free money,” he said, “but really it’s dragging me back in.” Several gamblers told The Times that promotions fueled their addictions....

In 2018, when the Supreme Court ruled that states could legalize online sports gambling, it ushered in a new era in which betting has moved beyond casinos and racetracks. Professional sports games are now saturated with celebrity advertisements, encouraging people to wager on their phones. DraftKings and its rival FanDuel dominate this new industry, which has expanded into online casino games and, more recently, prediction markets. DraftKings says it has 11 million customers, compared with five million in 2022.... Silicon Valley firms spent years analyzing every digital interaction to predict what will keep users clicking on advertisements. Now, as companies like DraftKings have made gambling accessible to millions on smartphones, they too have collected an extraordinary wealth of data.

7. The imposition of the 0.4 per cent MDR fee on UPI transactions of more than Rs 2000 has generated intense debate. Janak Raj has a very good article. 

8. Some facts about the SpaceX business model assumptions.

Analysts have the company delivering revenues of over $650 billion, with an operating profit of over $335 billion by 2031. The company itself is projecting revenues of $1 trillion by 2030 (that is 25 per cent of India’s current gross domestic product). The models have the company generating no free cash flow through 2031, with capex of over $1.76 trillion from 2026 to 2031. Total annual capital expenditure for listed Nifty500 companies in India is about $100 billion. Such is the scale and ambition of SpaceX.

9. The cost differential between imported and domestically manufactured solar cells is significant, and assumes importance in light of the restrictions on the use of imported cells for grid-scale solar plants.  

The ALMM List-II mandate requiring domestically manufactured cells for utility-scale projects from 1 June 2026 tightened cell supply and lifted prices... The shift to domestic sourcing can sharply increase costs for projects that were originally bid on the assumption that imported cells would be used... Sudharman Ezhil, director and CEO of Natrinai Ventures (NGE Green Energy), said the cost difference between a domestic-cell plant and a non-DCR plant is currently at least ₹70 lakh to ₹1.2 crore per MW. "On a 50 MW project, that is ₹35–60 crore that was not in anyone's bid model," Ezhil said. According to him, projects bid before mid-2025 assumed imported cells at ₹14–15 per watt. The same module using a domestic cell now costs ₹24–25 per watt, he said. "That alone moves the total project cost by 15–20%," Ezhil said. He said the issue is not limited to cost. "Cell manufacturing is far more complex than module assembly, process control, wafer quality, yield, and India's listed cell capacity is a fraction of its module capacity," he said. Developers are therefore dealing with both higher procurement costs and uncertainty over the long-term performance of newly listed domestic cell lines. Projects awarded at tariffs of around ₹2.50–2.60 per unit were bid when costs were lower. Once a power purchase agreement is signed, developers have limited ability to pass on higher project costs through the agreed tariff... The domestic content requirement (DCR) premium alone could increase utility-scale tariffs by ₹0.25–0.40 per unit, even before the cost of storage is included.

Are we saying another round of defaults, restructurings, and consolidation in the solar industry? 

10. China ramps up gold imports in efforts to diversify its reserves.

China has spent a record sum importing more than 1,000 tonnes of gold this year as the central bank and local investors pour cash into bullion amid rising geopolitical tensions abroad and poor returns on local assets. The world’s second-largest economy spent $158.8bn on gold in the first eight months of the year. That compared with spending of $96.5bn for all of 2025 on 886 tonnes of gold... Chinese investors are increasing gold purchases as part of broader efforts to diversify their assets. Chinese holdings of US Treasuries fell to $618bn in July — the lowest level since August 2008...  

Domestic investment options in China are more limited since the country’s property market began collapsing in 2021. The benchmark CSI 300 index is down 1.8 per cent for the year and is still more than a fifth below its peak in early 2021. Meanwhile, yields on Chinese government bonds are close to record lows.

11. The yen carry trade, which has been an important driver of cross-border capital flows and a major buyer of US Treasuries, apart from contributing to keeping down the value of the yen, may be reversing after nearly three decades. 

The yen carry trade is the term for when hedge funds and others use Japan’s currency to access low-cost financing to make bets in markets across the world. For almost 30 years, investors have borrowed the cheap, stable yen in order to fund higher-yielding investments elsewhere, exploiting differences in interest rates and, in particular, the fact that until this month the central bank benchmark rate had not risen above 1 per cent since 1995. But every so often, those differences threaten to shrink, or the value of the yen shifts with unexpected speed. Investors exit carry trades and dump the acquired assets — fuelling spectacular spasms in global markets from emerging economy debt and Nasdaq stocks to cryptocurrencies and luxury property. For this reason, the health of the global economy is deeply connected to the state of the yen, making the carry trade a proxy — albeit an opaque one — for risk...

Even though its true size is extremely hard to gauge, the current value of the carry trade may far exceed $2tn, making it probably the biggest it has ever been, the world’s regulators heard from the experts in Tokyo. The concern that the cheap yen may be anchoring US Treasuries and may have helped inflate a bubble in AI-related shares, they added, leads the list of worries. Many strategists now say that one of the top risks for the year is the danger that the carry trade unwinds... In previous reckonings of the carry trade, the overseas investments of Japanese companies were rarely considered... According to data from Citi, the total outstanding Japanese stock of foreign direct investment, incorporating equity capital, reinvested earnings and debt capital, reached ¥384tn in 2025, meaning it has increased from 20 per cent of GDP in 2014 to more than half today. Citi estimates that non-financial corporations in Japan now hold more overseas assets than banks, pension funds and insurance companies...

For years, the speculative carry trade and the enormous underlying outflow of corporate Japan’s investment created downward pressure on the yen. Now, analysts are wrestling with the prospect of that being reversed - even if many believe that Japanese households and companies are too conservative to move with speed. The mere fear of such an outcome could start a carry trade unwind in motion as investors rethink how safe their current positions really are... A sharp carry-trade reversal, or a massive but gradual repatriation of Japanese capital taking advantage of decades-high yields on domestic bonds, could prove extremely painful to Bessent and other finance ministers across the world. During its era of rock-bottom yields at home, Japan has been a reliable source of demand to absorb record levels of rich-world sovereign borrowing.

12. Anthropic's spectacular pre-IPO valuation run up.

Founded in 2021, the creator of Claude hadn’t even produced a dollar in revenue until 2023. By August, it was making around $65bn on an annualised basis, although such unofficial numbers should be treated with kid gloves. This growth seems to have come as a surprise to Amodei too. Only 18 months ago, Anthropic expected its revenue in 2027 to be just $12bn. Now, some investors predict a revenue run-rate of $320bn by the end of next year. They are not impartial, of course. But if they are right, then $2tn would represent a valuation of just seven times its 2028 sales. That’s a little less than Microsoft, according to LSEG. SpaceX, meanwhile, trades at 16 times that year’s revenue. Take that as the benchmark — they are both companies with wild aspirations and charismatic leaders — and Anthropic could in future be worth $5tn.

13. Big Tech guarantees are surging and risks spinning out of control. Morgan Stanley analysts estimate $3.1 trillion in guarantees issued by the seven hyperscalers and chipmakers.

Big Tech companies are rapidly expanding their use of guarantees to back debt for AI data centres and chips, issuing up to $300bn in commitments in less than a year while recording little of that exposure on their balance sheets... These arrangements, under which tech companies guarantee a minimum future value for chips or data centres, join a growing set of creative financing structures embraced by Big Tech to accelerate the AI infrastructure boom... They typically backstop debt that is issued not by the tech companies themselves but by special-purpose vehicles that own the infrastructure, allowing the tech groups to lend their financial strength to the deals without needing to fully book the liabilities. The rise of guarantees adds a layer of exposure if Big Tech’s multitrillion-dollar bet on AI does not pay off because of disappointing usage, an oversupply of computing power or the failure to build sustainable business models around the technology... Their introduction to AI financing has unlocked cheaper financing for projects with these guarantees, which typically price at just a 100 to 150 basis-point premium to the guarantor’s own debt... Because the guarantor only covers the gap between the sale price and the guaranteed value, residual value guarantees “get more efficient balance-sheet treatment than a typical payment guarantee.”

Weekend reading links

1. Indian universities have come to dominate the global rankings for research paper retractions, following complaints of plagiarism, fake peer reviews, and other misdemeanours. According to the Retraction Watch database, India recorded 887 research paper retractions in 2025, form 21% of all retractions (second to China with 41%) despite contributing just 5% of all publications, and occupying six of the world's top 10 universities for retractions. 

2. Stunning statistic about the Algerian demographic dominance of the Les Blues, the French national soccer team.

Only two of France’s 26 players are of non-immigrant ancestry — 22 of them have African roots. Some, such as Mbappé, are deeply connected to their country of origin.

And this dynamic of reverse migration and migrant domination elsewhere.

Of England’s 26 players, eight have Caribbean forebears, 10 African, and 20 who were eligible to represent at least one other country because of their family heritage or birthplace. Belgium has players who trace their lineage to its former colonies — Congo, Burundi and Mali. The Portugal team has those of Cape Verdean, Angolan, and Guinean lineage. Those surplus to their requirements — players of African descent born and raised in Europe — in turn, populate most of the African teams. Ten of the 11 Senegalese players in the starting lineup against France in the opening game were born in France... Six of the players in the US national team are of Afro-Caribbean heritage... There are those from Nigeria, Ghana, and Jamaica. Three are from Hispanic backgrounds — Christian Roldan (Guatemala), Ricardo Pepi (Mexican-American) and Jesús Ferreira (Colombian-American). As many are from Europe, and three others have dual nationalities... For Australia's Socceroos, four players were born in refugee camps. The players represent 15 ethnic backgrounds and include a Malaysian with Sri Lankan roots. Eighteen other players have direct immigrant or refugee heritage. To contextualise, only one Black player (Sam Morris) and another of Caribbean descent (Andrew Symonds) have represented Australia in cricket.

This is a brilliant article by Sandip G about the magnificent quartet in the French team - Kylian Mbappe, Ousmane Dembele, Michael Olise and Desire Doue. 

3. The US military learns from Iran.

The US has, similarly, begun to build its production of drones. It used the Lucas, a one-way attack drone reverse-engineered by start-up SpektreWorks from an Iranian Shahed-136, for the first time in combat in February. The Pentagon is looking to begin mass-producing them, and has requested to triple its spending on drones and related technologies to over $74bn next year.

4. Shenzhen, with 400,000 taxi drivers licensed to provide services in 26 platforms, will permit robotaxis from July 1. The new rules will allow the Shenzhen government to promote the “orderly development” of robotaxi tests, demonstrations and commercial pilots either in select zones or citywide. 

5. Friedrich Merz's landmark pension reforms

Under proposals agreed by a bipartisan commission, a compulsory initial contribution of 0.5 per cent of employees’ pre-tax income, rising to 2 per cent by 2031, will go into a Swedish-style public pension fund managed centrally and invested in capital markets. Contributions are split 50/50 between employees and employers. The statutory minimum retirement age of 67 is set to rise in line with life expectancy; rights to early retirement for people with 45 years of contributions will be restricted.

Such measures have become vital to reduce the deficits of Germany’s unsustainable pay-as-you-go system. Some 16.5mn baby boomers will retire by 2036 with only 12.5mn new workers joining the workforce, according to some estimates. The government spent about a quarter of the total federal budget on plugging gaps in the system in 2024; economists say that could double to 50 per cent in two decades.

Linking the retirement age to life expectancy is projected to mean only a gradual increase — to 67.5 by 2041 and 70 by 2091. But economists say this is the only sound way to stabilise the system without spiralling payroll taxes or huge federal subsidies. Narrowing early retirement rights will address a drain of experienced workers amid acute skills shortages.

6. Important graphic that highlights the extent of renminbi depreciation since the beginning of 2022 and the surge in surplus.

7. China expands export restrictions on dual-use items against Japanese companies in the latest instance of weaponisation of its manufacturing dominance. 

The companies added to the export control list include subsidiaries of Mitsubishi Electric and Mitsubishi Heavy Industries. The restrictions will also apply to several Japanese government research organisations including the National Institute for Defense Studies. Chinese exporters are banned from selling to the entities on the restricted list, and foreign organisations or individuals are also prohibited from selling dual-use items that were built or originated in China. China last expanded the list to 40 companies in February. In parallel with the expanded export control list, China’s commerce ministry on Monday put 20 Japanese companies and organisations on its watchlist, meaning they will get closer scrutiny in any matters relating to potential dual-use technologies. The list includes subsidiaries of Fujitsu, Mitsui E&S, Hitachi, Komatsu and Terra Drone. Beijing’s targeting of Japanese companies is the latest example of China’s weaponisation of trade in recent years. The EU Chamber of Commerce in China in April has found that Beijing has nearly tripled its use of export controls in the past five years. While some instances have been in response to western measures, the researchers noted that Beijing’s controls have also frequently targeted trade chokepoints.

8. GST balance sheet.

Though average GST collections in absolute terms are almost 90 per cent higher than those in the pre-GST period, other parameters tell the real story. The average growth rate in tax collections and the tax-GDP ratio are lower under the GST regime compared to the pre-GST era. Collections were further marred by GST cuts starting September 22, 2025.

9. India's labour market challenge.

With high-skilled IT services under pressure, a financial sector with limited capacity to create low and medium skilled jobs and manufacturing struggling to gain traction, the one area where jobs are being created is low-end services. Delivery riders for Zepto, which has just filed its papers for an IPO, have gone up from 49,278 in 2024 to 2.21 lakh in 2026 — more than a four-fold increase. Zomato and Blinkit have almost doubled to 10 lakh riders in two years. Swiggy now has 6.1 lakh riders, while Uber, at 14 lakh active drivers, outstrips Indian Railways. The gig economy is emerging as an urban employment sink.

10. The Uniqlo-Toray partnership that underpins Fast Retailing's spectacular growth. 

In April 2000, Uniqlo founder Yanai paid a visit to the offices of Toray, a Tokyo-based chemicals and materials conglomerate he had read about in a magazine. It marked the start of a strategic collaboration that provided Uniqlo with arguably its most important advantage over rivals: access to high-tech, specialised fabrics. After testing 10,000 prototypes, Toray invented a material combining four types of synthetic yarn that absorbs moisture from the body and converts it to heat. Uniqlo branded it Heattech, and since 2003 has sold 1.5bn garments made from or containing it. Toray also helped develop the fabrics behind AIRism, used as a breathable base layer, and the Ultra Light Down ranges of packable jackets insulated with bird plumage... control over fibre shape and fineness, dubbed nanodesign, has helped to make highly water-repellent and durable $50 lightweight parkas, creating a far cheaper alternative to specialist outdoor brands such as Patagonia. The two sides are entering a fifth phase of collaboration that aims to combine synthetic fabrics with natural ones, such as introducing cashmere into Heattech products to make them softer. Okawa believes few other retailers have such deep relationships with their key suppliers.

11. Good FT long read about the Jamie Dimon succession struggle at JPMorgan. The things that stand out are the following: 

One, the appointment of someone to the top position in any organisation, public or private, is bound to be opaque and involve considerable discretion. The only disqualification would be the egregiously ineligible. For any others, there will always be ways to spin it as a fair process. This holds with greater effect as the stakes go up. 

Two, in the succession struggle, dominated as they are by a multiplicity of considerations, among those eligible or qualified, it is rare that the most professionally competent will emerge as the successor. 

Three strong leaders will always delay succession, and even when they choose to retire, will seek to retain enough levers to influence the decisions of their successors. Most often, it is about decisions involving the promotion of the interests of those in the organisation closest to them, their pet projects or initiatives, broader organisational strategic shifts, etc.

Weekend reading links

1. Samsung's spectacular turnaround, from being in the doldrums as late as in 2024.

This month its market value, which has soared by 400% in the past year, hit $1trn for the first time, propelled by furious spending on artificial-intelligence infrastructure. In the first quarter of 2026 its operating profit rose to 57trn won ($38bn), more than eight times as much as a year before. Analysts expect profits to keep rising at a blistering pace, thanks in particular to the seemingly insatiable demand for its advanced memory chips... Semiconductors accounted for 61% of sales and 94% of operating profits in the first quarter. It is one of just three firms capable of making at scale the memory chips needed for ai, alongside SK Hynix, a South Korean rival, and Micron, an American one. The number of memory chips Samsung sold in the first quarter was up by about 20% on the preceding three months, but the average selling price rose by 90%.

2. The Economist argues that the calm in global oil markets despite a supply shock of some 14 mb per day can be traced to the 4 mbpd of increased exports by the US and the 4.5 mbpd of reduction in Chinese imports, coupled with rationing across countries. 

3. As the rise of AI threatens white-collar jobs and increases the returns to capital, The Economist proposes some measures to redistribute the gains. 

If employment falls, income that once went to workers is likely to show up as high profits in AI firms, chipmakers, data centres or elsewhere in the supply chain. Clever tax reforms, such as levies on corporate profits that are above a normal return on capital, on land and on natural resources, could capture these rents. The case for inheritance taxes to prevent the entrenchment of a capital-owning elite looks even stronger than before. At the same time governments could help workers adjust. Public wage-insurance, which smooths out falls in income after job losses, can help workers find better opportunities (and so can eventually pay for itself). Denmark’s active labour-market policies, in which the state helps people find and train for new occupations, have been proved to cut spells in unemployment... 

A last set of radical ideas, such as the partial nationalisation of ai firms. This week a South Korean presidential adviser floated a citizens’ “dividend” from AI businesses, sending the local stockmarket down by 5%, before backtracking. In America politicians murmur about giving citizens shares in AI companies via “Trump accounts”. In economic terms there is little difference between a well-designed tax system and a government stake in the private sector—and countries without AI giants will have to rely on taxes rather than seizing shares in foreign companies. But America may find that some public ownership is the best way to make the social upside from the technology transparent.

4. The changing face of Reliance Industries.

5. America's remarkable productivity growth miracle since the pandemic (it predates the AI boom).

Now with AI coming of age, the productivity spurt is likely to continue. 

6. Egypt may well be the leader in land monetisation to promote economic growth in any substantial form.  (HT: Adam Tooze)

Since 2015, Egypt has increasingly contributed public land as equity, while foreign investors provide capital, development expertise, and project execution. Once a project is completed, revenues are shared according to pre-agreed division... in 2023, Egypt appointed the bank’s International Finance Corporation as its advisor for the asset monetization program, leveraging its experience supporting emerging markets. While land monetization has been tried elsewhere, Egypt’s projects are among the largest... For the Ras el-Hekma development on the country’s North Coast, Egypt contributed approximately 40,600 acres of state-owned land along the Mediterranean. The UAE (via its ADQ sovereign wealth fund) committed roughly $35 billion, the largest foreign direct investment in Egyptian history. Egypt received immediate foreign currency inflowsfor the land, a 35 percent stake in the project, and long-term profit participation... A similar project, also on the North Coast, is Alam el-Aroum/Samla near Marsa Matrouh. The Qatar Investment Authority-linked Qatari Diar is investing almost $30 billion, which includes a $3.5 billion upfront land payment for some 20 million square meters and $26 billion in development investments. A revenue share for Egypt (15 percent after cost recovery) is part of the deal.

Another arrangement is in place for Egypt’s New Administrative Capital (NAC). About thirty miles east of Cairo, the NAC is designed as the government seat and a commercial hub; reports estimate total development costs of up to $58 billion, including infrastructure and governmental, commercial, and residential districts. Foreign direct investment plays a role in specific sub‑components like the Central Business District (CBD) and future free-trade‑zone ventures. Chinese banks led by the Industrial and Commercial Bank of China provided 85 percent of funding for twenty towers in the CBD. The China State Construction Engineering Corporation developed the CBD; Gulf investors (such as the United Arab Emirates’ DP World) developed commercial parcels. The state monetized land incrementally for the NAC, and parcel sales financed development, without increasing Egypt’s debt.

All this appears very impressive. While the article paints a picture of success, it would be interesting to peel layers and scrutinise this. 

7. This is anecdotal, but tells a lot about why India lags in manufacturing.

8. Spain is undertaking an ambitious experiment in immigration.

Since 2022, Spain’s foreign-born population has surged by an annual average of 665,000, the equivalent of adding a city the size of Málaga each year. Last year the country accounted for roughly one-third of the total increase in the EU’s immigrant population, according to the Rockwool Foundation, a Berlin think-tank. Supporters say the influx has given Spain’s ageing society a much-needed burst of economic vigour. Critics call it a poorly planned strategy that is straining the country’s infrastructure and creating new social tensions... In less than a quarter of a century, Spain’s foreign-born population has gone from one in 20 residents to almost one in five, a higher proportion than even the US... Last month the Spanish government’s most contentious immigration move to date took effect — a sweeping amnesty giving at least half a million people the chance to gain residency and work permits and move out of the shadow economy... applicants must prove he was in Spain before January 1 this year and has been there for five consecutive months.

The country is already experiencing an acute housing shortage, has among the highest youth unemployment rates at over 10%, and the anti-immigrant Vox party is running third. The final outcome on the rapid rise in immigration is yet to be known. 

9. Ruchir Sharma points to an area where China trails badly behind the US, the negligible role of the renminbi as an international currency. 

With a 17 per cent share of global GDP, but only 2 per cent of central bank reserves, China is trailing 30 to 40 years behind previous superpowers at a similar stage of their ascents... Britain at its peak accounted for 40 per cent of trade, but 60 per cent of trade payments were in sterling. China by contrast has a leading 15 per cent share of global trade, but only 2 per cent of trade bills are invoiced in renminbi...

China will remain an incomplete superpower until it can match this financial firepower. For decades, it has kept its financial system more tightly sealed than any other major nation. It now ranks in the bottom fifth of nations by international investment position, which captures the level of foreign ownership in the domestic market. Foreigners own less than 5 per cent of the stocks and bonds in China, one-fifth the level in the US. Its home market is something of a local prison. Beijing has generated economic growth with heavy infusions of government money, corralled at home by capital controls. Its money supply has multiplied sixfold since 1980 to 230 per cent of GDP, among the highest in the world. This liquidity sloshes around inside the walled economy, much of it in the domestic debt market, battered lately by a property bust. Beijing is wary of easing controls, lest it unleash capital flight.

10. The US has been the biggest oil export beneficiary of the Iran war.

11. The booming market for whey protein.

Prices for whey protein isolate have soared fivefold to €28,000 a tonne since 2023, outstripping cheese and butter prices by more than four times as producers struggle to keep pace with a booming protein market... Thirty years ago whey was primarily used in animal feed or spread on farmland as a fertiliser. Whey is the liquid separated from curds during the cheesemaking process. Now, dairy groups upgrade the liquid by filtration to produce whey protein isolate, a valuable ingredient for use in sports supplements as well as groceries such as yoghurt, bread and fizzy drinks, as weight-loss drugs and the protein megatrend propel demand. “This is reshaping the economics of dairy,” said Jose Saiz, analyst at Expana, a commodity market information service. “It used to be a product with no value . . . now cheese could become the byproduct of whey production.”

12. The UK's experience of small altnets driving broadband expansion and lowering prices has come with excesses. 

Over the past decade, more than £31bn has been raised to roll out full fibre broadband across the UK, with private equity giants, including Macquarie and KKR, backing upstart challengers — or “altnets” — in the sector. Yet despite the initial investor optimism that the “altnets” could snatch customers away from industry leaders, the firms have been dogged by high build costs, lower-than-expected customer uptake and a sharp response from the country’s largest provider — BT’s Openreach — to deploy its own fibre infrastructure. The destruction of shareholder value has been brutal. At the last count, the “altnets” posted losses of more than £1.5bn in 2024, according to Enders Analysis. After accumulating some £9bn of net debt as of 2025, some companies have already been placed into administration, while others have fallen into the hands of lenders... 

Prior to the “altnet boom”, which accelerated from 2021 onwards, only 24 per cent of Britons had access to full fibre internet, according to Ofcom. Fast forward five years, that number is now more than 78 per cent, with altnets serving almost 20mn homes with full fibre, according to Assembly Research. By next year, Ofcom estimates 95 per cent of UK homes will have full fibre, putting it in line with Europe’s leaders, including Spain and Luxembourg, where regulators encouraged full fibre rollout earlier than the UK. The “altnets” have also forced BT’s telecoms infrastructure provider Openreach and Virgin Media O2 to expand their own fibre networks, giving consumers a choice between providers who are now forced to think faster and harder about how to up their game. This added competition has meant prices have fallen, with the average monthly real-terms list price of UK full fibre broadband falling from £62.38 in September 2021 to £43.46 in September 2025, a drop of 30 per cent... altnets are taking close to 1mn [customer] lines from BT annually.

13. Alan Beattie argues that EU has initiatied several trade measures against China, though their implementation has been weak, primarily due to internal opposition within the bloc. 

One of the recent instruments with a bit more bite is the Foreign Subsidies Regulation (FSR), launched in 2023 and designed to level the playing field against state-backed Chinese companies bidding for contracts or producing and selling in the EU. It’s notable that it gives a lot of investigatory and decision-making powers to the Commission, specifically to the internal market and competition directorates, which are used to having autonomous powers. By starting investigations into their operations, the FSR has managed to get some Chinese companies to pull out of public procurement bids. But when the EU tries to use its internal market powers to investigate supposedly subsidised Chinese businesses trading in the single market, it becomes clear just how strongly Beijing is willing to resist. Last week, in an investigation dating to 2024 into the Chinese cargo scanner company Nuctech, Beijing cited new supply chain security laws to forbid Chinese companies to comply with requests for information, saying Brussels’ extraterritorial reach was illegitimate.

14. Arvind Subramanian and Devesh Kapur on the contrasting tales of India and China in monetisation of lands by urban local bodies. 

China’s land revenues increased from less than 1 per cent of GDP to more than 10 per cent at its peak. In contrast, India’s revenues have stagnated at about 1 per cent of GDP through the entire growth phase. Put differently, the Chinese government’s collections from land revenue for every urban resident that was available for spending were about 15 times more than India’s in 1999; at its peak in 2020, this multiple increased to 225.

15. As AI capex surges, there are growing doubts about whether it will generate the returns required to justify it.

For each of these hyperscalers, I collected the consensus estimates of analysts for the capital expenditures and revenues between 2025 and 2030. In these five years, capital investments are expected to rise by 20 per cent a year, a growth rate never seen before in this industry. Meanwhile, revenues are expected to grow 15 per cent annually. If we make the heroic assumption that there are no costs, then the additional revenue is the profit these companies are expected to make from their additional investments in AI data centres. Yet, even under these extremely optimistic assumptions, I calculate the implied return on investment is highly negative for all of them except Amazon. These numbers show that if the hyperscalers continue on the current trajectory, the AI boom will become a story of one of the largest destructions of shareholder value in history... If the hyperscalers want to generate, say, a 10 per cent return on investment, they would have to find an additional $2tn to $5tn in revenue a year. A tall order for a group of companies that currently generates revenues of just $1.5tn per year.

See this comparison with the technology, media and telecom (TMT) bubbles of the late nineties.

In 2025, US businesses invested almost $1.5tn in IT equipment and software. At the peak of the TMT bubble, it was $466bn or $829bn when adjusted for inflation. Indeed, the US economy is growing solely because of the tech boom. I calculate that over the past four quarters, 93 per cent of US GDP growth was explained by tech investments. Even at the peak of the TMT bubble, it barely reached 60 per cent.

16. Tim Harford points to evidence that retailers jack up prices in response to shocks much faster than they bring prices down, and that retailers make their money not so much during the upcycle than in the downward phase.

Johannes Brinkmann and Nikhil Datta of the University of Warwick recently published an analysis of the impact on petrol and diesel prices of the oil price shock in 2022, following Russia’s onslaught in Ukraine. They found that in the UK, retailer margins compressed: the wholesale price of diesel rose by 39 pence per litre, while retail prices only rose 16 pence. This is the opposite behaviour to that predicted by the greedflation hypothesis. A natural explanation of this price compression is that retailers feel under more intense scrutiny when prices are rising. Brinkmann and Datta show that searches on the petrolprices.com website increased dramatically when prices did — and that areas where such searches were more common were also areas where the price compression was more intense. 

Brinkmann and Datta’s analysis is merely the latest in a long tradition of research describing “rocket and feather” pricing at the pump — capturing the idea that pump prices neither faithfully track the ups and downs of the crude oil market, nor exaggerate them — instead, they shoot up like a rocket but drift down again like a feather. What is more, the quick surge upward reaches prices less lofty than one would expect; it is during the slow descent that retailers make their money. Fifteen years ago, Matthew S Lewis and Howard Marvel noted that customers spent more effort searching when prices were rising, even though there was little benefit to that search, since most retailers were charging similar prices. When pump prices were falling, there was more variability from forecourt to forecourt and a higher return to shopping around, but most customers did not bother, feeling content that prices were moving in the right direction.

17.  Preference shares are a complicated instrument.

The “preference” investors receive — usually a slightly higher dividend — comes at the expense of voting rights. Preference shares therefore arguably resemble the worst of both worlds of debt and equity. Like bonds, they do not offer any influence over the company’s decision-making. Like ordinary shares, they do not come with a contractual claim to annual payouts as dividends are subject to management discretion. Such non-voting shares have been a prominent feature in corporate Germany. Four of the 40 blue-chips in the Dax have used them to establish substantive two-tier share structures for years: Volkswagen, Porsche and BMW, the three auto giants, and glue and detergent maker Henkel. All are dominated by controlling families who hold a tight grip over the firm. 

Two further Dax companies — Merck and Fresenius — are listed as “partnerships limited by shares”, a German legal structure known by its acronym KGaA, that makes some shareholders more equal than others through other means. Deutsche Bank listed its asset management arm DWS as a KGaA in 2018, too, warning at the time that this structure could dent its valuation. Yet the club of German blue-chips with differential voting rights will soon become smaller after BMW shareholders voted to abolish preference shares last week at its annual meeting. The group’s 54.7mn preference shares, representing 10 per cent of BMW’s equity, will soon be swapped into ordinary shares with voting rights... In the US, dual-class share structures have become increasingly popular as fast-growing tech groups want to tap public markets while keeping outsized voting power for insiders. Elon Musk’s SpaceX even wants to grant its CEO 10 times as much voting power as external investors.

Sample this about SpaceX  

Elon Musk's special class of shares currently gives him control of 85 per cent of the voting power at SpaceX.