Weekend reading links

1. A bond market story of the last two weeks has been the rise of the 10-year Japanese government bond yield above 3% for the first time since September 1996, following a weakening yen and an unprecedented bilateral market intervention with the US Treasury to shore up the currency.

The market expects a rate hike by BoJ from its current 1% to prop up the yen and also quell rising inflation. However, this would clash with the commitments of Prime Minister Sanae Takaichi for fiscal spending to boost the economy. 

The pressure on yen and rising bond yields are also a matter of concern for the US, since it could trigger repatriation of the massive Japanese investments in dollar assets, including the holding of US Treasury bonds.

Japan is the top foreign holder of US government debt, with more than $1tn, much of it held by financial institutions... market concern that Japan’s enormous pension funds and life insurers, nursing tens of billions in paper losses on their bond holdings, could shift their investment strategies as yields at home become more attractive... Citi’s Takashima said life insurers had been waiting for yields on 20-year JGBs to hit 2.5 to 3 per cent but were still not buying at scale as they feared that prices could drop further.

2. This is an excellent article on baby diaper manufacturing in India. The two costliest items are not manufactured in India and are imported.

Further, there's an inverted tax structure.

At the 56th GST Council meeting on 3 September 2025, diapers were moved from 12% to 5%, effective 22 September 2025... But SAP sits under HSN 3906, taxed at 18%... Output at 5%, inputs at 12% to 18%... input tax credit piles up faster than it can ever be set off against output tax. The credit is not lost. It is refundable under Section 54(3), and from 1 October 2025 the government began granting 90% of such refunds provisionally. But refundable is not the same as available.

Diapers are covered under PLI, and it is ending up supporting contract manufacturers who import SAP. 

Until an Indian chemical major commits to commercial SAP capacity, every rupee of PLI is subsidising the assembly of imported chemistry. We are building the world's fastest converting industry on someone else's molecules.

In this case, the PLI should target the SAP manufacturing in India. Supporting contract manufacturers to make what they are already doing does not require PLI. It underlines the point that PLI needs to focus on domestic value addition and not merely investment and sales. This requires more detail-based policy making. 

3. Tata Capital Healthcare Fund appears to be doing what public innovation funds ought to be doing, de-risking new market segments in healthcare. 

TCHF is not really in the business of spotting the next unicorn and riding it to a listing. It is in the business of manufacturing acquisition targets. It finds a chronic, non-negotiable demand, dialysis, cancer, joint replacement, wraps a proven clinical model in Tata credibility, scales it into Bharat where nobody else will do the asset-heavy work, de-risks the operations, and hands a finished, cash-generating, regulation-cleared asset to a global consolidator or a domestic roll-up desperate to enter that exact niche...

TCHF works because of a stack of things that have nothing to do with money: extreme sector focus, operational depth, brand-as-regulatory-passport, a structure that insulates it from its own parent, and the patience to build assets strategic buyers are forced to buy. Take any one away and the model wobbles... The winners in corporate venture will look... more like TCHF: narrow, patient, operationally heavy, and quietly building things the giants of their industry will one day have to acquire.

Jayant Mundhra's Substack is excellent.

4. Is AI exposure driving students to pivot away from Computer Science?

Also on AI, the latest PISA student learning outcomes survey findings show uniform declines in reading and math. 

The new report shows that reading scores across the OECD have fallen by 25 points and maths by 22 points since 2018. “Given that 20 score points is roughly equivalent to a year of learning, this implies that a majority of 15-year-old students across the OECD in 2025, on average, were performing at a level typically expected of 14-year-olds,” according to Pisa. Schleicher linked the decline in the latest scores to the dominance of distracting short-form videos on platforms such as Instagram and TikTok, as the report suggested that “digital distraction” is harming education across the world. “We cannot say for sure, but skimming social media feeds and rapidly processing information may be contributing to worsening ability and motivation to engage with complex texts and data,” the report said.

5. US labour-capital share of output - rising corporate profits amidst falling wage share. 

Pre-tax earnings hit an annualised $4.8tn in the second quarter, or 18 per cent of national income, according to Bureau of Economic Analysis data, the highest share since the aftermath of the second world war. Employees’ share from wages and benefits fell to 60 per cent, the lowest level since the 1950s... Bumper returns largely benefit richer Americans, who receive much of their income from investments, while middle- and lower-income households rely more heavily on pay cheques. Inflation has also outpaced wage growth, causing real hourly earnings to fall by 0.2 per cent in July versus a year earlier.

6. A global whisky glut, or whisky loch, amidst rising consumption in India.

The amount of whisky maturing in casks has soared from less than 400mn litres a decade ago to around 1.4bn litres this year, or 389mn cases — enough to meet current consumption levels for three years, according to Martin Purvis and Duncan McFadzean’s Commercial Spirits Intelligence newsletter. That has caused many of Scotland’s distilleries to curtail output by more than a third, insiders say... Today’s glut is the result of increasing production during the 2010s, which led to an excess of casks maturing during times of global economic uncertainty.

7. California, the bastion of liberalism, struggles to build. 

A high-speed rail line that voters approved in 2008 but that has yet to lay a track. A large housing project outside Los Angeles and the redevelopment of a Navy yard, both in planning stages for decades. The state has arguably the nation’s worst housing crisis, with rent and home prices that far exceed the national average. The high cost of living, combined with strict environmental and land-use regulations, has led to a steady migration of companies and residents to less expensive states. The main problem, Mr. Metcalf continued, is that California’s overlapping regulatory processes, scattered among state and local agencies, make it nearly impossible to approve — or even outright deny — a project. Even when the governor or state legislators get behind an idea, local governments often have effective veto power. Delay becomes the normal course of nonaction.

8. London's experience in reducing knife crimes.

Knife crime rose dramatically in Britain from 2017, especially among teenagers... Hospitalisations for “assault by sharp object” have fallen by a third in London since their peak. Knife-related homicides have shrunk by a half. Last year teenage homicides in the capital fell to their joint lowest level (similar to 2012) in almost 30 years... As English politicians scrambled for answers during the 2017-19 “epidemic”, Lord Sadiq Khan looked to Scotland. In the previous decade Glasgow, once labelled Europe’s murder capital, had achieved impressive reductions in violent crime. One reason was the roll-out of the Scottish Violence Reduction Unit (VRU), which aims to prevent violent crime by bringing the police, schools, hospitals and sports clubs together to identify at-risk children and direct them away from crime. Between 2008 and 2018 Scotland’s VRUs were credited with bringing about a 38% fall in homicides and a 43% drop in attempted murders and serious assaults—many of them knife-related. 

Lord Khan announced England’s first VRU in London in 2018. Today there are 20 such units across England and Wales, covering areas that account for 80% of all knife crime. A recent Home Office review found that England’s VRUs caused a 12% fall, since 2019, in hospital admissions for violent assault among the under-25s. That is modest compared with Glasgow, but the Home Office looked only at the national average. Violent crime has fallen most in cities like London—dense urban areas where the model is easiest to implement.

9. The state of gender empowerment.

In India violence against women is so normalised that nearly 40% even of women think a husband is sometimes justified in beating his wife. In Mali the figure is nearly 70%... In South Asia only a third of women are in the labour force; in the Middle East and north Africa, only a fifth are. Since 1990 the share of labour income that accrues to women has risen from 35% to 44% in liberal France; in patriarchal Pakistan, from 1.5% to a still-woeful 9%. Removing the barriers to women working would raise income per person by a fifth in many countries, estimates the World Bank—a bigger economic benefit than avoiding a typical civil war...

Yet even the most sexist laws can be scrapped, as Saudi Arabia has shown. Before a series of reforms that started in 2011, women there were barred from all but a handful of jobs and not even allowed to drive. Now they are free to work, drive and shun the hijab if they choose. The share of women in the labour force has nearly doubled since 2010, from 18% to 34%. That is startling progress for a kingdom many thought hopelessly stuck in the past—even if there is still a long way to go.

See also this. 

10. Nvidia is the central bank of AI?

Over the past three years it has pledged over $70bn in investment in startups and offered $300bn in financial support to its customers... It has promised around $25bn in future equity investments. It owes around $33bn in debt. Its potential liabilities to customers amount to about $300bn, but only come into play in a downturn and so do not appear on its balance-sheet. These include the $105bn guarantee behind Open­AI’s data centre; as much as $125bn through the Wall Street partnership; and around $67bn in other backstops.

Also this

Nvidia’s financial engineering is partly a response to its biggest customers’ transformation into rivals. “Hyperscalers”, tech giants such as Amazon, Google, Meta and Microsoft, account for roughly half of Nvidia’s revenue. This year they are projected to invest around $800bn, largely on AI infrastructure. But most of them have begun designing their own chips, which puts their future purchases from Nvidia in doubt. For the hyperscalers, these custom chips are much cheaper, costing between a fifth and a third as much as Nvidia’s...

Hyperscalers have investment-grade credit ratings, which keep their borrowing costs low. Upstart neoclouds have similar spending needs, but little revenue. Their loans are naturally much more expensive. Alphabet, Google’s parent company, sold $2.75bn of 50-year bonds in November, at an annual interest rate of 5.7%. The rate at which CoreWeave, the biggest neocloud, borrowed $2.6bn in July was almost double. It is this gap, between hyperscalers’ borrowing costs and everyone else’s, that the bank of Nvidia would like to narrow. One way it does that is by taking equity stakes in startups that will be customers themselves or that will help fuel demand for Nvidia’s chips indirectly. Last year Nvidia made about 90 such investments, nearly twice as many as two years earlier. This year it has already agreed another 60-odd. 

Some of these cheques aim to propagate open-weight AI models, which users can download free of charge and adapt, unlike proprietary offerings from firms like Anthropic, OpenAI and Google, which users tend to access via subscriptions and whose inner workings are hidden. In August Nvidia agreed to pay Poolside, a startup building AI coding models, $6bn to license its software and a further $1bn for a stake. It has also agreed to buy Hugging Face, a platform hosting open-weight models, for $12.9bn. The intention behind such investments is to fuel demand for Nvidia’s chips by creating a proliferation of AI products and companies that are independent of the hyperscalers... In early July it announced a new stratagem in which it promises to top up neoclouds’ income from new data centres to an agreed floor. These undertakings, the exact terms of which vary from deal to deal, often last for six years. Throughout that period, Nvidia promises to pay a set price for “compute”, as the jargon has it. If the neocloud manages to sell the capacity in question at a higher price, Nvidia receives a share of the difference. This safety-net makes neoclouds’ future revenues much more predictable and so lowers the cost of the debt they take on to build new data centres. That, in turn, spurs demand for Nvidia’s processors.

In the graphic below, red are neoclouds, yellow are AI labs, and blue are financial firms. Also, the dashed circles are equity stakes, and the black boxes indicate guarantees and purchase commitments. 

But things may still be under control.

Morgan Stanley, an investment bank, reckons Nvidia’s “all-in” debt will rise from $53bn early next year to $200bn by the beginning of 2029 as guarantees come into effect. But that is offset by a stash of cash and liquid securities currently worth $99bn, and a business that will generate about $200bn in cash this year. Only a cataclysmic downturn that caused all Nvidia’s guarantees to come due and its profits to evaporate almost entirely would imperil the company—as things stand. The picture may change, however, if Nvidia’s commitments keep growing.

See also this. 

11. Friendships across classes matter for life outcomes. 

Recent research suggests... having pals across class boundaries appears to be one of the strongest predictors of upward mobility for people in low socio-economic groups... What’s more, children who grow up in areas with more cross-class mixing go on to earn more on average, controlling for parents’ income. To isolate the effect of the county itself, the researchers tracked families who moved. Assuming those moves were not related to their children’s future prospects — a reasonable assumption — the analysis found that people who spent a larger portion of their childhood in a better-connected county went on to earn more.

12. The graduate premium is reversing in US and UK.

13. The Indian space ecosystem is a reform success.

India’s space ecosystem has expanded significantly, with more than 450 space industries and over 440 startups now engaged in the sector. Isro is facilitating greater private-sector participation through the government-owned, company-operated (GOCO) model, under which private industry can manufacture, test and supply components and subsystems using its own facilities and infrastructure. Isro has facilitated nearly 440 technology transfers so far, enabling wider adoption of space technologies.

14. The victory of the far-right Alternative for Germany (AfD) in the Saxony-Anhalt province in the east of Germany was expected. Though it has fallen short of a majority by just three seats, an FT editorial calls for allowing it to form the government.

The firewall, a well-intentioned policy of non-cooperation with the far right, which is considered a threat to democracy, has turned into a trap for the mainstream parties, particularly the Christian Democratic Union of Chancellor Friedrich Merz. As support for the CDU shrinks, it is forced to share power invariably with its leftwing opponents in dysfunctional coalitions, whose quarrelling and meagre results drive votes to the AfD, further reducing the scope for compromise between the centrist parties. The firewall has failed to stem the AfD’s advance and is probably furthering it. The alternatives, though, are all bad given the far right’s current strength... 

The least bad outcome there would be for the party to take power with the backing of the Bündnis Sahra Wagenknecht (BSW), a small leftwing nationalist movement that rejects the firewall approach. An AfD regional government would lack the powers to enact some of its more outlandish policies, such as abolishing the right to asylum or renewing energy imports from Russia. To be sure, it could be an extremely uncomfortable time for Germans of immigrant backgrounds and other minorities living in the state. But extra vigilance from the courts and civil society could help to keep a far-right regional government in check. The far right would pose less danger in power regionally than nationally and executive responsibility could deflate its support. In any case, its opponents lack the seats to form an alternative majority. To try to do so would look undemocratic, given AfD’s vote share, and could backfire electorally.

15. Despite all its ubiquity, India's media and entertainment industry is a small revenue earner in proportion to its size.

Last year, IT accounted for 7.3 per cent of India’s GDP, against 0.8 per cent from M&E. The figure is 7 per cent for the US and 4.6 per cent for China... At $32 billion in revenues, the Indian M&E business is abysmally small. It is about a third the size of the Walt Disney Company or roughly equal to that of Tata Consultancy Services. Given the numbers, almost 700 million smartphone users, 650 million television viewers, and 421 million newspaper readers — the size of the firms in any of these segments doesn’t even scale up to Indian standards, let alone global ones... There are only two large media firms with any scale — JioStar and Google India — both at roughly $4 billion in top line. For a country that loves to chat and debate, there is no news brand that has found traction elsewhere. Ninety per cent of all that is watched in theatres, on TV or streaming is Indian stories. Yet there is no global entertainment firm of any heft from India... there is talk about Indian cinema’s soft power globally. But our presence in the global market is a blip compared with, say, Hollywood or Korea. The Indian movie business has been stuck at $1.5-$2 billion in domestic revenues for years. Indian studios simply do not have the money or distribution heft to attempt full-fledged global releases. It is only when the domestic market hits $10 billion or more will you have Indian studios that can have the strength and appetite to go global.

16. This contradicts the oft-repeated claim that a generous social safety net has made Europe a region of shirkers.

17. Huw van Steenis channels Charles Goodhart on the importance of practical wisdom in monetary policy.

Goodhart once put it to me, “every Monetary Policy Committee should have members who have a real-world understanding of the plumbing of financial intermediaries”. In my shorthand: the PhDs need the plumbers.

18. The latest PISA school test scores, where Swedish student scores declined, draws attention to the debate on the country's decision to encourage private schools. Contrary to public perception, Sweden has gone the farthest among continental European countries in privatisation of schools, healthcare, and elderly care, through a series of reforms in the 1990s and 2000s. 

About one in five Swedish children now goes to an independent school... This week’s scores in the international Pisa survey revealed the country’s worst-ever rankings of levels of reading, maths and science of 15-year-olds... The Swedish system is as distinct as it is extreme. Unlike most countries with private schools, Sweden’s system is meant to be egalitarian — so the schools are open to all, through the same free system as state-funded institutions. The private schools receive funding from the state in a voucher system that means they get the same amount of money per pupil as state schools, but can make profits from it if they run things efficiently.

19. Chinese exports have been growing faster than world imports since the turn of this decade. 

20. Finally, an excellent long read on how Javier Milei is taking deregulation to boost Argentina's oil and gas and mining sectors. 

Weekend reading links

1. US equity markets fact of the week.

In the year to March 2026, the US received well over $600bn in net equity inflows. Not only was this a record sum, it was also double the flow into government and agency bonds. Net equity flows exceeded debt flows by the largest margin in history.

2. US utilities are shifting from net metering to net billing on rooftop and home solar installations.

Many utilities pay homeowners the same rate they charge for electricity, meaning the energy sent to the grid when the sun is out offsets the cost of the energy pulled from the grid at night. That’s called net metering, a system where the energy you send is worth typical U.S. prices of 10 to 30-plus cents per kilowatt-hour. Under newer policies, often called net billing, utilities buy the extra energy back at a lower rate, often 2 to 10 cents.

3. In a country ravaged by deflation (pork prices have hit a 16-year low), egg prices are rising in China.

Egg prices are up by more than 40 percent from a year ago, according to an index that tracks the top producing provinces. They recently hit a 10-year high by another benchmark that tracks prices at a wholesale market in Guantao, in northern China... Two years ago, farmers started expanding after several bumper years, adding more egg-laying hens from 2024 to 2025 than ever before, according to Aspen Li, an analyst who studies the egg market. Suddenly, there were too many eggs and the price plunged. Farmers then found themselves short of money to feed all their chickens. So they culled them, at a rate that experts considered excessive. Eventually, there were not enough egg-laying hens to meet demand, sending prices to levels that Mr. Li said were “even higher than my expectations.”

4. Japan's return to normalcy.

5. President Xi's flagship Belt and Road Initiative (BRI) projects hit a record $20.1 bn in green energy financing in the first half of 2026, topping its total value for the whole of 2025, 

Total BRI deals rose to a record high of $126.3bn in the first half of 2026, up from $123.3bn in the same period in 2025. The 2026 figure was composed of $49.8bn in investment and $76.5bn in construction projects.

A distinguishing feature of BRI projects is the increased share of the private sector.

The latest data highlighted how the BRI had become primarily driven by private companies rather than China’s state-owned enterprises. According to the University of Queensland data, the share of engagement from the private sector, as opposed to SOEs, reached 48 per cent in the first half, compared with 13 per cent in 2022.

6. The Great Divergence between labour productivity and wages. 

Labour's share of income has fallen sharply.

7. Tata Zudio is following in the footsteps of Zara.

Despite its bargain offerings, Tata said gross margins at Trent, which includes the more upmarket Westside clothing stores, stood at 44 to 45 per cent. “The playbook is you go end-to-end — you go from the source of the product to the customer and you do everything yourself in between,” he said. “That’s why we do our own transporting. We do our own warehousing. We have our own shops. The manufacturing units we use are more or less dedicated to us.”... Zudio eschews online retailing, believing that high return rates clog up the operation and generate too much extra cost.Rapid turnover is key to Zudio’s appeal. New lines are launched every Thursday and a team of social media watchers monitors fashion trends and feeds them to a design team.

8. The IPOs of SpaceX, OpenAI, and Anthropic could generate a massive flush of philanthropic capital.

Nan Ransohoff, the head of public goods at the payment processor Stripe, estimated in a Substack post, between $37 billion and $100 billion could become available to charities annually... And that doesn’t even include OpenAI’s employees. Or the newly rich created by SpaceX, whose I.P.O. spawned an estimated 4,400 millionaires (and some 400 employees now worth more than $100 million). Or the many other IP.O.s on the docket... Giving money away is a common maneuver to avoid taxes: Up to 74 cents of every dollar donated to charity would have been paid as taxes, according to the Institute for Policy Studies. It reported that charitable giving in 2022 alone had resulted in $73 billion in lost tax revenue.

9.  Debt service and defence make up two-thirds of Pakistan's budget expenditure.

10. On Europe's pensions problem.

Across the EU, 47 per cent of the bloc’s social protection expenditure is spent on old age and survivors’ benefits, ahead of 36.7 per cent spent on sickness and disability and 8.7 per cent on families and children. Even in the UK, where private provision plays a greater role, the country’s fiscal watchdog has forecast that spending on the state pension — the second-largest item in the government budget after health — will rise from almost 5 per cent of GDP to 7.7 per cent by the early 2070s. Italy has the EU’s highest pension costs at just over 15 per cent of GDP, according to statistics from the European Commission. France and Greece each spend over 14 per cent. In Germany, a third of all federal tax revenue will be spent plugging holes in the state pension system this year, according to an estimate by Munich economic think-tank Ifo... 

In France, the audit office estimated last year that the country’s pension deficit, currently around €1.7bn, could grow to €15bn by 2035 and balloon out to €30bn by 2045 if further reforms are not made. European countries have tried to tackle their surging pension costs since the 1990s, and have had some successes, with many lifting the state pension age from 65 to 67 or more. Italy has tied its pension age to life expectancy, while France has pegged annual pension increases to consumer price inflation rather than earnings. In some countries, spending on pensions as a percentage of GDP is set to fall in the long term as a result of such moves...

In most big European countries including Germany, France, Italy and Spain, the state provides the main earnings-related pension, paid for by contributions from current workers, which aims to replace a proportion of pre-retirement income. Such systems were modelled after the one created by Otto von Bismarck, who introduced national state pensions in 1889 to ward off surging socialism and strengthen loyalty to the authoritarian German monarchy... It paid up to 20 per cent of average salary to industrial workers when it became payable. It was designed to prevent destitution rather than facilitate a comfortable retirement. Other countries soon followed. In the UK, Prime Minister David Lloyd George ushered in old age pensions in 1909... A full UK state pension is currently close to a third of median earnings; private provision, usually through workplace schemes, is meant to provide additional security in retirement... Italy has one of Europe’s highest replacement rates, with pensions paying out close to 80 per cent of average earnings... Contribution rates, from workers and their employers, are correspondingly high at 33 per cent of earnings in Italy, 28 per cent in France and 19 per cent in Germany... That compares with an average of over 20 per cent in the UK — paid via national insurance — and just 11 per cent in the US.

11. Ramesh Chand argues for rationalising the PDS and moving to a nutrition security programme.

Between 2013-14 and 2025-26, India’s real per capita income (net national income at 2011-12 prices) increased by 78 per cent, from ₹68,572 to about ₹1.22 lakh... At the time of the NFSA’s enactment, around 22 per cent of the population lived below the poverty line. Both official estimates and independent studies now suggest that poverty had declined to around 5 per cent by 2022-23... In the early years of the NFSA, roughly one-third of the beneficiaries were poor and two-thirds were above the poverty line. By 2025-26, only about 10 per cent of those receiving free food grains were estimated to be below the poverty line while the remaining 90 per cent were non-poor... The latest UN report... estimates that the proportion of Indians unable to afford a healthy diet declined sharply from 59.8 per cent in 2017 to 35.5 per cent in 2025. In absolute terms, the number of such people fell from 759 million to 589 million. This indicates that about 170 million people crossed the affordability threshold for a healthy diet during this period as their purchasing power improved... The prevalence of undernourishment in India declined from 13 per cent in 2013-14 to 9.8 per cent during 2023-25, indicating progress but at a relatively slow pace.

12. The Fed under Kevin Warsh appears to be facing a credibility crisis as it grapples with rising inflation.

As Mr. Warsh spoke, longer dated Treasury yields rose sharply, with the 30-year bond closing in on its May peak of 5.2 percent. That was the highest level since 2007. The rise in the 30-year Treasury yield suggests some worry about Mr. Warsh’s ability to tackle inflation in the long run.

And this.

Long-term government borrowing costs shot higher as Mr. Warsh spoke, with the 30-year bond notching its largest one-day increase in more than a year. Trading around 5.22 percent, it is at the highest level since 2007. The 10-year Treasury yield, which serves as the benchmark for borrowing costs around the world, also rose alongside expectations about inflation over a longer time horizon.

13. FT has a long read describing the story of Situational Awareness, the $20 bn hedge fund of 24-year-old Leopold Aschenbrenner, which had racked up gains over 400 per cent on the back of massive leverage, and has now run into the wrong side of the AI sell-off. The fund sold its portfolio to Ken Griffin's Citadel in an almost distressed sale. Apart from being an alumnus of OpenAI, Aschenbrenner is also the husband of Avital Balwit, who now works as chief of staff to the CEO of Anthropic. 

What stands out in the entire article is the reluctance to call out the obvious contributor to Aschenbrenner's success: the strong likelihood of insider trading at a massive scale. It is hard to believe that the smart investors who were betting on Situational Awareness were betting on the expertise or competence of Leopold Aschenbrenner, and not on the insider information he possessed.  

14. Fascinating snippet on wealth creation in the equity markets.

Economic analyst Hendrik Bessembinder has shown that half of the net wealth creation in US stock markets over the last century flowed from just 46 public companies, out of a total of almost 30,000. Looking at his list of the greatest wealth creators, the knowledge companies dominate the top spots, and all the winners have high walls around them.

Weekend reading links

1. SpaceX IPO is ample proof that the Chinese wall between equity research and investment banking in IB firms is a myth.

You might expect wildly divergent views on a company as speculative as SpaceX. Here the underwriters disagreed only over the scale of the upside. Sceptical voices came from outside the syndicate. Morningstar, for example, valued the shares at $63.

This is now dead

When the dotcom bubble burst, regulators uncovered emails showing that Wall Street analysts were privately disparaging stocks they were publicly touting. A 2003 global settlement between banks and regulators on analyst research imposed sweeping restrictions. It barred investment bankers from influencing analyst compensation, tightly controlled communications between research and banking, and banned analysts from IPO pitches and roadshows. New York Attorney General Elliot Spitzer’s premise was that shielding analysts from bankers would deliver truly independent — and better — research. On one level, the reforms succeeded. Banks have constructed a robust compliance apparatus to wall off research from investment banking. “Chaperones” now police interactions between analysts and corporate finance to prevent even the appearance of pressure. The Spitzer global settlement formally ended last December in favour of more flexible rules overseen by an industry association.

It is hard to see how SpaceX shares can avoid a cratering.

About 30 per cent of the roughly 640mn SpaceX shares available to trade have been borrowed to sell short, up 10 percentage points over the past 10 days, highlighting how traders are becoming increasingly sceptical of the company’s market prospects... About 900mn further SpaceX shares could become available to trade as soon as next month when certain lock-up provisions for pre-IPO investors expire. Traders who doubt there is sufficient demand for the deluge of extra equity are cashing out now as a result, market participants say.

2. After reducing their hiring last year, firms with jobs exposed to AI are planning to increase their entry-level hiring this year, but they come with a "seniorisation". 

Candidates for starter roles in the most AI-exposed industries are now expected to show a mastery of the skills traditionally demanded of more seasoned staff, such as data-driven decision-making and people management... Eleanor Lightbody, CEO of Luminance, which develops AI for the legal profession, says these middle layers could be squeezed out altogether, “because we are going to hire more juniors, who are really going to understand how AI works, and more seniors [are] staying in the business because [by using AI], they can be more productive and have more capacity”. The challenge for job seekers is that it is hard to find entry-level jobs that allow them to develop the higher proficiency that seniorised roles now require... Reliance on AI is increasing the demand for distinctively human “soft skills” — or “power skills”, as some are now calling them — such as creativity, empathy, judgment and networking ability. PwC’s jobs report found that new tasks added to job adverts for AI-exposed roles were two and a half times as likely to call for such capabilities.

3. Very good description of how China became so dominant.

It enticed unsuspecting giants such as Apple, Tesla, Motorola, and Lucent with low-cost logic. When sufficient local manpower was trained, subcontractors developed, and stakes became important, China applied the squeeze. China would break contracts, cancel licences, coerce the transfer of technology, control pricing, withdraw incentives, force equity participation, conscript technology and evict them. Huawei, BYD, CATL, and SAIC are some examples of the resulting indigenous giants that emerged. In an act of silent invasion, conscripted technologies have been converted into military capability. It is dominant as a supplier of several raw materials, such as rare earth minerals, gallium, graphite, and lithium; a dominant buyer of soya from Brazil and iron ore and wines from Australia; a financier of BRI projects; and a provider of processing technologies for Chilean copper and lithium in select South American countries. With this web of dependencies, it can choke several factories.

4. Janan Ganesh feels that for Britain to start making real reforms, the incoming PM Andy Burnham must do more welfare and subsidies and discredit the whole .ideology.

What is the precedent for a rich democracy doing pre-emptive economic reform? Which nation ever made controversial structural changes — involving winners and losers — to prevent a crisis, rather than in response to one? Southern Europe needed the Eurozone panic of 2009 onwards to make spending cuts. Hawke, Keating, Margaret Thatcher and Ronald Reagan were reacting to 1970s stagflation. François Mitterrand in 1983 was reacting to a market shock that to some extent he’d created. Reform only happens when it absolutely has to happen. So try again, prime minister. Fail again. Fail worse.

5. Japan embraces a more proactive government-driven economic growth policy.

Sanae Takaichi's cabinet approved a policy blueprint that targets a combined $2.3tn of public and private sector investment between now and 2040 in 17 chosen sectors. Ministries will be able to make budget requests without upper limits; budget construction, according to the document, will be “fundamentally” changed. Much of the blueprint is about economic security, but a refreshingly large amount is about growth... possibly the most meaningful lines in the new strategy place Japan’s future efforts in the global context. “Among advanced countries, there is a big trend of the government and private sectors working together on large-scale, long-term industrial spending,” it read... The government would strive, the document further promised, to meet the challenges of “the era of great global competition between industrial policies”... 

On the same day that the blueprint was agreed, the Ministry of Economy, Trade and Industry produced separate guidance for growth investment — an effort to encourage Japan’s 4,000-odd listed companies to shift more of their endeavours towards growth and a witheringly blunt critique of how matters are at the moment. Within Japan’s 350 largest companies (by sales), 65 per cent of invested capital remains locked in what it calls value-destructive segments, according to METI’s research. In the US, the equivalent ratio is 39 per cent. Both Takaichi’s blueprint and the new METI guidelines are attempting a new version of industrial policy that not only seeks to spur growth, but places a huge bet on the government’s ability to encourage companies in a way that market forces have not.

6. Kevin Warsh is trying to scale down forward guidance

“Financial market prices are probably the most important source of information to guide central bankers,” he said at his inaugural press conference last month. “But when all the financial markets are doing is reflecting back what we’ve said, then we’re taking the most important source of information and we’re being blind to it.” Many agree with the Fed chair’s view that central banks’ focus on predictability has led to a world in which markets obsess more over what officials say than what is actually happening in the economy. “Forward guidance has turned markets into a mirror,” says Ajay Rajadhyaksha, global chair of research at Barclays. “The Fed watches markets; markets watch the Fed. And no one’s actually watching the economy.”...

Recent research by the US central bank suggests its decisions also have an outsized impact on equity markets, leading to big changes in how investors price stocks. Advocates of forward guidance say it helps avoid the sort of surprises for the markets that feed overall volatility and eventually raise borrowing costs as investors demand greater compensation to stomach market swings. Warsh and his allies counter that the attempt to pacify markets simply encourages greater risk-taking, damping short-term volatility but storing up bigger shocks for later. The debate is all the more important because of the backdrop: the surge in borrowing over almost two decades. Government debt around the world has risen sharply following the global financial crisis, the Eurozone crisis, the pandemic and the wars of the 2020s...

Some analysts highlight the so-called taper tantrum of 2013 — when markets were unnerved by Fed statements about its plans to shrink its balance sheet as a result of officials’ false sense of certainty. Others link the 2023 collapse of the US’s Silicon Valley Bank to central bankers’ previous pledge to keep interest rates low.

This is a very important factoid about Fed communications.

Between 1990 and 2022, an era in which the status and prominence of central banks steadily grew, US 10-year government bond yields fell by more than 7 percentage points. All of the downward moves throughout that period took place during the three days around Fed meetings, rather than in response to political events or economic data. But the relationship broke down after the Fed appeared flat-footed on inflation in 2022. The Riksbank data shows that the central bank’s meetings had little to do with the subsequent rise in yields.

An important concern for the bond markets is the sharply increased volume of Treasuries held by hedge funds that use leverage to bet on tiny differences in interest rates. 

The Fed estimates that large hedge funds’ holdings of US Treasuries doubled between 2023 and 2025, faster than the growth of the market as a whole. Such funds now own more than $2.5tn in Treasuries, according to the US central bank and US Treasury data. Such sums dwarf China’s official holdings — not an exhaustive account of the country’s exposure — which have fallen from $1tn in December 2021 to $659bn in May 2026, according to US Treasury statistics. Moreover, the Bank for International Settlements, the central bankers’ bank, has warned that the hedge funds might have to dial back their stakes in government bond markets even quicker than they arrived — a possibility it describes as one of the most troubling financial stability risks in the world today.

Then there are the other concerns for bond markets.

The Bank of England said this month that AI hyperscalers borrowed more in the first half of 2026 than in the whole of 2025. So far this year they have accumulated as much new debt as the UK government. An interest-rate surprise from the Warsh Fed might not only unsettle Treasury yields but set off a vicious circle of margin calls — when a sudden price movement in assets bought with borrowed money requires an injection of capital — and fire sales by hedge funds that could create a dash for cash.

7. A cautionary tale on the difficulty of private enterprise establishing and managing entire railway systems comes from the example of Brightline Express, which connects Miami and Orlando, and became operational in 2023.

Brightline traces its roots to 2007, when Edens’ Fortress spent $3.5bn to acquire Florida East Coast Railway, then a listed freight transport company. Its tracks spanned from north to south in the Sunshine State, and construction for what would become Brightline began in 2014, with the Orlando service beginning a decade later. In a 2024 bond prospectus, Brightline executives forecast that by 2026 they would have nearly 8mn annual riders, split roughly evenly between the Orlando-Miami route and a more local service in South Florida. That base of customers was expected to generate $700mn in revenue... Even with customer levels up 16 per cent year to date through May this year, ridership will struggle to hit 4mn this year. Operating income has at best reached break-even before debt service costs... 

The promoter Wes Edens’ Fortress wrote off its investment long ago, and it is now hedge fund bondholders who are jockeying for control of Brightline. But alongside distressed debt specialists such as Nut Tree Capital Management, Aristeia Capital and Redwood Capital Management, there are a handful of more staid asset managers including Nuveen and First Eagle also at the table. As well as corporate bonds issued by subsidiaries, the group’s debt stack includes more than $2bn of traditional municipal bonds, half of which are guaranteed by a bond insurer.

Weekend reading links

1. Potato glut hits Europe, and in particular Belgium.

Europe faces a surplus of five million metric tons of the type of potato used for fries. For months, the price of a metric ton of potatoes on the spot market in Belgium, the world’s biggest exporter of frozen fries, has languished at precisely zero. It was nearly 600 euros ($690) three years ago.

2. The Murugappa Group (through Axiro Semiconductors and CG Semi), the Tata Group (through Tata Electronics), and Crystal Matrix are leading India's semiconductor chip design and manufacturing push. 

3. Very good assessment of a decade of the IBC law.

The idea was to enable timely exit of non-viable firms, preserve viable businesses, restore credit discipline, and unclog credit channels... Till March 2026, 1,419 companies had emerged from insolvency with approved resolution plans, with the proportion of companies achieving such outcomes improving steadily... Creditors have realised ₹4.32 trillion through resolution plans. The oft-cited haircut of around two-thirds, measured against admitted claims, can be misleading because claims are frequently inflated while asset values are deeply eroded by the time firms enter insolvency. A more meaningful benchmark is liquidation value: Resolution plans have, on average, yielded 167 per cent of the liquidation value. Importantly, firms resolved under the IBC demonstrated operational revival post-resolution. Within five years, sales and capital expenditure nearly doubled, asset utilisation improved sharply, and the aggregate market capitalisation of resolved firms rose from about ₹2.8 trillion to ₹9 trillion... 

In all, 3,003 companies have entered liquidation under the IBC, but most had little realistic prospect of revival. Their assets averaged barely 5 per cent of admitted claims, and four-fifths were already sick or defunct before entering insolvency. The IBC merely provided an orderly exit for firms that had failed long before the process began. Yet, the incidence of liquidations in India is comparable to that in the United States and significantly lower than in the United Kingdom and Australia... Resolution plans rescued 78 per cent of distressed assets, while liquidations accounted for 22 per cent. When all pathways to revival are considered — resolution plans, withdrawals, settlements, appeals, and rescues during liquidation — the number of revived companies substantially exceeds those liquidated.

4. John Burn-Murdoch points to evidence that remote working and NOT AI is responsible for the ongoing declines in entry-level hirings. 

Peter John Lambert and Yannick Schindler have a fascinating counter-proposal: the take-off of remote work. Early-career workers require more supervision than experienced hires, and build important skills, knowledge and social capital by observing and working alongside senior colleagues. Working from home adds friction to these processes, making entry-level workers more costly to bring on board in terms of time and resources and slowing their prospects for promotion. As such, the rise of remote work has worsened the trade-off for hiring entry-level workers, while leaving the calculus for senior hires unchanged. The evidence fits the theory. Lambert and Schindler analysed hundreds of millions of new hires and job postings and found that although both occupational exposure to AI and remote working rates line up with the outsized pullback in junior hiring, the link with AI evaporates once you account for whether a role is remote. In other words, it only looks like AI is behind the hiring crunch for junior software developers because coding jobs are also disproportionately done remotely. Jobs less exposed to AI but amenable to remote work (eg lawyers) have also seen weak junior hiring; roles with high AI exposure but an emphasis on in-person work (eg receptionists) have held up better.

5. Is Steve Jobs leaving the greatest corporate legacy ever?

Apple now rakes in sales of over $1bn a day. Its services business alone, driven by the App Store and Apple Pay, generates more revenue than Netflix, Spotify and Adobe combined, with a margin of around 75 per cent. Under Cook, the company has returned around $1tn to shareholders through dividends and buybacks… Nearly two decades since the product launched, Apple shipped well over 200mn iPhones in 2025 and the device still accounts for about half of Apple’s $400bn of annual sales, with high product margins underpinned by the highly efficient, Asia-based supply chain also created by Cook. Apple’s astonishing profitability is sustained by an annual cadence of new iPhones, each iteration featuring largely incremental improvements on the one before. Research and development spending as a proportion of revenue went from 8 per cent at its height in 2001 to a 2 per cent low in 2012 as the iPhone boom began, meaning that for a while Apple was spending proportionally far less than its Big Tech peers.

6. Good primer on why oil prices have remained less elevated than expected - decline in Chinese oil imports (almost 4 m bpd) and rise in US exports (almost 4.5 mbpd).

7. The US economy is increasingly resembling a one-trick pony of AI.

The US corporate profit share has climbed to a record 13.8 per cent of GDP, while net income margins across the broad US equity market have recovered to about 9.7 per cent, close to earlier highs. At the same time, market leadership has become unusually concentrated: a handful of AI‑linked stocks now account for roughly 40 per cent of the S&P 500’s market capitalisation, according to Bank of America data. Headline profitability is being flattered by a small slice of the economy earning extraordinary returns from the scramble to build AI capacity...

Spending strength is increasingly coming from upper-income households where wealth and income are more tied to equities than wages. The stock market has, in effect, become part of the growth model: rising AI profits lift share prices; higher share prices support the spending power of wealthier households; and that spending helps keep demand alive. Lower-income households, by contrast, are more exposed to squeezed real incomes and softer labour-market momentum... Large technology groups have produced surging revenues and margins with only limited growth in headcount... So long as investors believe AI will earn very high long-term returns, the loop can remain self-sustaining: capital expenditure stays firm, equities stay buoyant and affluent consumers keep spending.

8. The spectacular surge in Google's capex.

Five years ago, its capital expenditure on servers, network equipment and such was $25bn, which it funded out of operating cash flows of $92bn. In 2027, analysts expect $250bn of capital expenditure, versus cash flows of $260bn — a tighter fit. In its second quarter next year, Visible Alpha estimates suggest Google will spend more than it makes, for the first time in its listed history.

9. A good illustration of deficient national security discipline comes from how the US is allowing the exports of tungsten scrap to China even as it spends money abroad buying tungsten mines. 

Since early 2025, Chinese scrap traders have been seeking tungsten throughout the US, prompted by a shortage outside China caused by declining supply and intense demand from the aerospace, weapons and tools industries. The effort has set off a bidding war with American buyers and calls to ban sales of a critical national security resource to overseas buyers... Sellers said they were fielding calls from Chinese buyers looking for the material, while American buyers said they were being outbid by Chinese rivals willing to pay as much as five times the usual price... 

Tungsten scrap commonly comes from worn-out industrial tools such as drill bits and mining equipment. It can be crushed and chemically processed back into tungsten powder or carbide for use in new machinery and tools. The shortage has been triggered by Beijing imposing export restrictions on it and an array of other critical minerals in early 2025 and the country cutting mining quotas. China accounts for more than half of global mined and refined tungsten supply and about half of demand... 

Tungsten is broadly used in military applications, including in bullets and missiles. Traders said stocks were already low before the Iran war and that companies do not typically hold large stores of the metal. There was “no availability” outside China of the so-called “intermediate” products that manufacturers need — mined ore that has been processed... The price of tungsten has risen by more than 200 per cent since May 2025, while tungsten scrap has risen 350 per cent, according to Argus Media.

10. The AI wave is lifting all stocks, including those legacy IT firms like HP and Dell. 

11. India's non-tax revenue fact of week.

In the last three years, the share of RBI surplus in the government’s non-tax revenue has stayed between 42 and 52 per cent.

12. SpaceX IPO in a graphic.

13. Real Madrid at the top of European football club valuations.

14. The universe of PSUs in India has been rising.

15. Rama Bijapurkar's categorisation of India's consumption class.

The important thing is that 93% of households have annual consumption less than $5700.

16. Anthropic facts.

Last month, Anthropic crossed $47bn in run-rate revenue, a metric used by start-ups which estimates annual revenues based on short-term performance. This is a more than fivefold increase since the start of the year... Anthropic’s valuation has soared from $350bn to $900bn in 12 weeks. It is now one of the fastest-growing companies in history.

17. The biggest threat to the US superpower status now appears to be its surging public debt, which is now $36 trillion held by the public and federal agencies 

The exorbitant privilege has ensured the dollar's status as the world's pre-eminent reserve currency and the Treasury market's role as the world's safest haven asset, thereby allowing the US access to unlimited global capital at a low cost. While there are no competitors to the dollar on the horizon, the Treasury's safe haven status is facing competition. 

18. The most important difference between the dotcom bubble and the AI bubble.

19. Japan is losing people. 

Japan’s population peaked in 2008 at 128 million, and it is projected to fall to 87 million by 2070. The country is now roughly the same size it was in 1989... All but two of the country’s 47 prefectures reported population decreases in 2025, and the rate of decline is accelerating.

20. Finally, this says as much about the Indian stock markets as about the Korean and Taiwanese markets.

India’s stock market capitalisation was overtaken in the past week first by Taiwan and then by South Korea, as the value of Indian equities held by foreign investors slumped to a 10-year low of 7.3tn rupees ($76bn) on June 1. The value of Indian stocks was more than double that of Taiwanese stocks and roughly 3.5 times that of South Korean stocks 18 months ago, analysts at Bernstein said this week. “Fast forward just five months into 2026, and that lead has evaporated,” they added.