Zerohedge

Authored by James Howard Kunstler,

Darkness Dying

“The nature of the NGO scams is to have a cause that sounds philanthropic, like ‘Save the Orphans of Sadville’ and then they pocket the money and zero actual orphans are helped.” 

– Elon Musk

The exorcism of the USA just keeps revving up. You can tell by the number of revolutions-per-minute Elizabeth Warren’s head spins while she spews pea soup at the cameras. Who knew what a demon-infested slough USA Management Central was? And yes, I would like some insight as to how humble civil servants like Liz Warren accrue a $12-million fortune . . . and $30-million for Samantha Power (ex-USAID-chief) . . . and more than $150-million for Nancy Pelosi. Could it be as simple as just good stock-picking? (Is that how they spend their time?)

You have reason to suspect that what goes on in Washington DC is the greatest racketeering operation ever run on God’s green earth. “A threat to our democracy!” the Party of Chaos spouted incessantly during the election campaign in re: Donald J. Trump. “Democracy Dies in Darkness,” The Washington Post still declares on its name-plate. Yet, who exactly kept the lights off the past four years? Who scrambled the brains of the nation’s management and thinking classes? Who made mental illness aspirational?

You begin to detect that by “our democracy” they actually meant “our everlasting grift.” And it didn’t die in darkness — it thrived, grew, and spread in the moist bureaucratic darkness like the Devil’s own slime mold. And now it is being revealed, to the astonished disgust of slightly more than half the nation that was not on-the-take. Turn over a log in the woods and you have the metaphor for “our democracy.” Countless hundred-footed things slither around under it, their feeding interrupted . . .

The political left’s success springs from its dedication to organizing its member ranks and their activities. Organizing has been the key to their grand plan for arriving at Utopia. Except, sometime near the dawn of this century, with the torch of communism burning out, they realized that Utopia was a destination unlikely to be reached. Instead, they could turn their organizing talent to directing the money flow from their ever-expanding roster of world-saving NGOs into the bank accounts of their own member ranks.

USAID was the poster-child for that, a flowering of mutually-referential dollar feedback loops providing six-figure “jobs” and non-stop cocktail partying for the elite surplus churned out of the left’s training academies, Harvard, Brown, Yale – with a whopping vig paid to congress-persons and senators who disbursed massive taxpayer funding for each newly-sprouted org dedicated to the uplift of the “marginalized and oppressed.”

Of course, that was merely the feeding frenzy of the small fish on the surface. Deeper down, the money-flow was going to much more demonic enterprises: the color revolution gang in the CIA, State Department, and God knows what other surreptitious agencies. . . Antifa and BLM (the Democratic Party’s shock troops) . . . the news industry (now completely corrupted into a global mind-fucking operation) . . . Hollywood’s zeitgeist-shaping dream factory of girl-boss fantasies. . . book publishing (with its zillion-dollar “advances-on-royalties” to political celebrity authors, who could never possibly earn-out that windfall on book sales) . . . the school systems at every level . . . the medical-pharma matrix . . . the military procurement racket too vast to even quantify (and the probable cause of the Pentagon’s consistent audit failures) . . . and, we’ve learned recently, the care-and-feeding of twenty-million illegal aliens ushered into our country by the “Joe Biden” / Al Mayorkas travel agency.

This colossal worm-farm lies exposed now with its slithering denizens drying up under the DOGE sunlamp. The response by the political left’s clown troop fronting for all these scams is the most pathetic performative cluster-B psychodrama ever enacted on the streets of our nation’s capital: Schumer, Maxine Waters, Ayanna Pressley, Liz Warren, and every other mewling loser in Wokedom singing that old union ditty Which Side Are You On for the cameras — as if they were reenacting the 1907 Monongah Mining Disaster. They are crying— as the old saying goes — all the way to the bank.

The histrionics of the past three weeks are only the beginning, you understand, since USAID was just a mole-hill beside the mountain range of past turpitudes yet coming into view as Mr. Trump’s generals deploy in the battle-space. Yesterday — mirabile dictu! — Robert F. Kennedy, Jr., was sworn-in for Health and Human Services, to oversee the empire of fraud that public health became during the rogue reign of Tony Fauci and his cohorts. The flip-side of MAHA is Make Medicine Truthful Again. Everything about health-care in America slouches in disrepute and ignominy, from the doctors hostage to their private equity taskmasters to the faked drug trials at FDA to the deliberate data mismanagement at CDC to the grant-and-kickback game at NIH and NIAID, to the hellscape of medical insurance fraud, to the revolving door between pharma and government —RFK faces one of the most onerous tasks of filth-clearing since Hercules shoveled out the Augean stables. And then there’s the giant hairball of poisoned American food.

The solitary figure who remains absent on the playing field is Kash Patel, and you can tell by the delaying tactics employed by the Party of Chaos that they (and their blob allies) dread the coming day that he gets confirmed to lead the FBI. 

That’s when the combined forces of avalanche, tsunami, earthquake, and fire send forth an exterminating spewage of long-suppressed information about the 1960s assassinations, RussiaGate, the Epstein matter, the Ukraine money-laundry, and any number of other unresolved treasonous scandals. It’s going to happen. And, if by some quirk of fate, Mr. Patel fails to get the votes, somebody else eventually will, somebody equally capable of fumigating that rat-hole.

When that day comes, I’m sure Chuck Schumer will sing Kumbaya from the Capitol steps, expecting to make it all magically go away.

A top staffer of the Department of Government Efficiency (DOGE) arrived at IRS headquarters on Thursday ahead of a planned audit announced by President Donald Trump.

Elojn Musk aide Kavin Kliger visited the DC offices of the IRS to examine its systems, according to the Wall Street Journal, which noted that Kliger has been working at the Office of Personnel Management.

Later in the day, Trump announced that DOGE would audit the nation’s tax collection agency.

“The Internal Revenue Service will be looked at like everybody else,” Trump told reporters during a White House press briefing.

“They’re doing a hell of a job. It’s an amazing job they’re doing,” Trump said of Musk and DOGE. “I call it the force of super-geniuses, but it’s building, and you know they go up, and they talk to some of the people about certain deals, and they get all tongue-tied because these people get it. They’re very smart people. We need smart people.”

Trump was responding to a question about Kliger’s visit to the IRS and whether the administration wants to close the agency – to which Trump said he did not expect that to be the case.

Democrats Freak Out (again)

Of course, no investigation into waste, fraud, and abuse would be complete without Democrats for some reason having a huge problem.

Sen. Ron Wyden (D-OR) posted on X that his office heard Musk’s team was at the IRS.

“That means Musk’s henchmen are in a position to dig through a trove of data about every taxpayer in America. And if your refund is delayed, they could very well be the reason.”

NEW: My office is hearing that DOGE is now at the IRS. That means Musk’s henchmen are in a position to dig through a trove of data about every taxpayer in America. And if your refund is delayed, they could very well be the reason.

— Ron Wyden (@RonWyden) February 13, 2025

Yes, henchmen. Fraud-investigating henchmen.

As the Epoch Times notes further, after DOGE accessed U.S. Department of Treasury payment systems earlier in the year, a group of Democrats in the U.S. House of Representatives wrote to the acting IRS commissioner asking what confidential information DOGE had requested from the IRS and how many taxpayers had had their confidential information accessed by DOGE.

Separately on Thursday, senior IRS executives were instructed to identify all contracts that were nonessential for termination, according to an internal email.

The email said that the General Services Administration (GSA), which manages most government contracts, is demanding they review consulting contracts under their purview and determine whether they can be justified.

The GSA deems a contract nonessential if it “merely generates a report, research, coaching, or an artifact,” the email says. “Consistent with the goals and directives of the Trump administration to eliminate waste, reduce spending, and increase efficiency, GSA has taken the first steps in a government-wide initiative to eliminate non-essential consulting contracts.”

Valentine’s Day has arrived, and near-record high cocoa prices mean consumers can expect to pay significantly more this year for a box of chocolates at the supermarket than last year. The price surge has been mainly driven by tightening global supplies, with cocoa inventories in New York and London sliding to new record lows. 

Cocoa inventories at Intercontinental Exchange’s London warehouses sank to 21,000 tons this week, down from 100,000 tons one year ago.

“That is absolutely tiny, the tiniest we’ve ever seen,” said Jonathan Parkman, co-head of agriculture at commodity broker Marex, quoted by Financial Times. 

Parkman warned: “There is no slack in the system – that’s what it tells you. We’re very, very tight.”

He pointed to warehouses in New York as more evidence that the supply crisis is widespread across Western markets. He noted that stocks in NYC warehouses are around 90,000 tons, adding, “That is incredibly low for this time of the season.”

Sliding global stocks are a byproduct of adverse weather conditions in West Africa, crushing cocoa production, along with elevated demand worldwide, have been some of the reasons that cocoa prices in New York have tripled since the start of 2023. 

“People have been letting their futures expire so that they would get physical cocoa. And I don’t think there’s any incentive for traders to supply cocoa to those warehouses right now,” an executive at a major chocolate maker told FT, who did not want to be named. 

Last month, Bloomberg reported that Hershey was trying to gain approval from the Commodity Futures Trading Commission to purchase a massive amount of cocoa through the New York exchange. 

Panic Hedge? Hershey Reportedly Asks CFTC Approval To Buy Huge Cocoa Pile On NY Exchange https://t.co/F2dTAh0aQ4

— zerohedge (@zerohedge) January 9, 2025

Shortly after Bloomberg’s report, Goldman’s Natasha de la Grense told clients: “The headlines on Hershey today suggest the outlook for confectionary (cocoa) cost inflation is getting even more extreme.” 

In mid-December, Goldman’s commodity derivatives analyst Hugo Fuentes told clients to “go long cocoa” as “prices are positioned for significant upside driven by structural supply deficits, under-hedged consumers, and historically low warehouse stocks.” 

Last week, Hershey CEO Michele Buck provided encouraging news. During an earnings call, Buck told investors that signs of potential demand destruction have emerged.

Elon Musk’s artificial intelligence startup, xAI, is reportedly seeking to raise more than $10 billion in new funding, which would value the startup at $75 billion. The latest fundraising round comes amid reports that Dell is finalizing a major deal with xAI to supply advanced AI servers. Additionally, earlier this week, Musk and a group of investors made an offer to acquire Microsoft-backed OpenAI.

Bloomberg cited folks familiar with the fundraising talks and noted that Sequoia Capital, Andreessen Horowitz, and Valor Equity Partners will be existing investors in the deal. They said that xAI is canvassing potential investors, adding that the terms of the new funding round have yet to be finalized and could still change. 

Data compiled by PitchBook shows that xAI has raised billions at a breakneck pace, with its most recent valuation at $51 billion. More recently, The New York Post reported that the AI startup could be valued at upwards of $75 billion. The company secured $6 billion in funding during a Series C round in December, following another $6 billion raise in May.

The Series C round included Andreessen Horowitz, Fidelity Investments, BlackRock, Kingdom Holdings, Lightspeed Venture Partners, MGX, Morgan Stanley, Oman Investment Authority, the Qatar Investment Authority, Sequoia, Valor, and Vy Capital, among others. 

Earlier Friday, Bloomberg reported that xAI was preparing to lock in a deal with Dell for $5 billion worth of Nvidia GB200 AI servers to power its chatbot Grok and other AI services. Much of xAI’s computing is located at the 271-acre site in southwest Memphis, which the startup considers the world’s largest supercomputer. 

On Monday, Musk and a group of investors made a $97.4 billion offer to purchase the nonprofit that controls OpenAI. 

Sources familiar with discussions surrounding xAI’s latest fundraising round did not specify how the funds would be allocated.

Separately, Musk’s X recently wrapped up a sale of debt that had “upsized” demand from large, high-yield fund managers. Musk indicated that the social media platform’s multi-year advertising boycott by corrupt Deep State-controlled NGOs has wound down. 

“Revenue should improve rapidly this year, as the advertising boycott winds down,” Musk wrote on X last week. 

Talks of a potential fundraising round at xAI come as Musk revealed at the World Governments Summit in Dubai on Thursday that “Grok 3 has very powerful reasoning capabilities, so in the tests that we’ve done thus far, Grok 3 is outperforming anything that’s been released that we’re aware of, so that’s a good sign,” adding that the new chatbot would be released in a week or two.

Per NYT:

The sky is the limit for xAI’s valuation if Musk streamlines the government with AI.

Orange futures in New York are on track for the sharpest weekly drop in 57 years. Over the past several weeks, the market has been engulfed in a downright panic, with prices sliding for ten consecutive sessions. The catalyst behind the sharp selloff remains unclear. 

By Friday afternoon, the weekly percentage change for orange juice futures in New York was 22.5%, marking the worst weekly decline since the first week of November 1968.

OJ futs established a record high of $5.5 a pound in mid-December on news that Florida’s citrus production fell to the lowest levels since 1930. Since the peak, about two months later, the maximum drawdown has been a whopping 41%. 

The futures spread between the March and May orange juice contracts has shifted from backwardation to contango, signaling a drastic change in market dynamics and potential easing of near-term supply constraints. 

No single factor is driving the sharp decline in orange juice contracts – that we can see. There’s no word on whether drivers include improved weather conditions in Florida and Brazil or a liquidity crunch forced long positions to unwind in panic. Whatever the catalyst, the selloff was swift and severe.

The OJ crash brings to mind the movie “Trading Places,” starring Eddie Murphy and Dan Aykroyd, in which the duo profits from a collapse in frozen concentrated orange juice futures contracts.

The iconic line from the movie: “Sell, Mortimer! Sell!”

Earlier today we noted that one-time chip giant Intel, which has devolved to a shadow of its former self after years of catastrophic management decisions which cost former CEO Pat Gelsinger his job, just had its best week in history…

… after VP Vance, speaking at an AI summit in Paris on Tuesday, noted the Trump administration would boost domestic chip production. Momentum continued on Wednesday after a report from Robert W. Baird analysts suggested that the Trump team is working to broker a joint venture between Intel and TSMC, one which would focus on something we said last August has excess value at the Intel enterprise, namely its fabs.

Intel has 15 fabs; the fabs alone are worth $10bn/each in liquidation value.

The value created by management is negative $50 billion. https://t.co/HkqUQJ4A6J

— zerohedge (@zerohedge) August 2, 2024

Then moments ago, Bloomberg confirmed just that when it reported that Taiwan’s chip giant, Taiwan Semiconductor Manufacturing, or TSMC, is considering taking a controlling stake in Intel Corp.’s factories to increase US chip production, at the request of Trump administration officials as the president looks to boost American manufacturing and maintain US leadership in critical technologies.

Trump’s team raised the idea of a deal between the two companies in recent meetings with officials from the Taiwanese chipmaker, a source told Bloomberg, and TSMC was receptive. It’s unclear whether Intel is open to a transaction, although at the right price, it will be.

Bloomberg notes that the talks are in very early stages, and the exact structure of a potential partnership hasn’t been established, although – again – with the stock plumbing the lowest level in decades, even a modest takeout premium would likely be considered by the board. 

The intended result of the deal would see the world’s largest made-to-order chipmaker fully operating Intel’s US semiconductor factories. It also would address concerns about Intel’s deteriorating financial state, which has forced the company to slash jobs and curb its global expansion plans.

In short, this would be a takeover, although the deal remains fluid. The arrangement may involve having major American chip designers take equity stakes, according to the person, along with support from the US government. That means the venture wouldn’t solely be owned by a foreign company. TSMC is the go-to chipmaker for Apple, Nvidia and other companies developing semiconductors that power AI algorithms.

Under former CEO Pat Gelsinger, Intel embarked on an ambitious and expensive plan to restore its chipmaking lead, and the company won $7.9 billion in US government funding to support projects in four states. It’s also secured $3 billion to produce chips for the US military, all of which will be paid out over time as Intel’s plants hit key milestones. The company has received $2.2 billion as of January.

But that effort has so far failed to attract enough outside customers to make the investments worthwhile, particularly at a new site in Ohio. Intel’s own products also are losing market share, adding to the overall squeeze on its finances — just when it needs spend heavily. Gelsinger was forced out in December after the board lost confidence in his turnaround plans.  

* * *

Intel shares are on track for their strongest weekly gain on record, based on Bloomberg trading data dating back to 1982. Investor enthusiasm surged after Vice President JD Vance, speaking at an AI summit in Paris on Tuesday, noted the Trump administration would boost domestic chip production. Momentum continued on Wednesday after a report from Robert W. Baird analysts suggested that the Trump team is working to broker a joint venture between Intel and TSMC.

On Tuesday, at the AI summit in Paris, VP Vance told the audience: “The Trump administration will ensure that the most powerful AI systems are built in the U.S. with American-designed and manufactured chips.”

One day later, that was followed by a note via Robert W. Baird analysts claiming that the Trump team was pushing Intel and TSMC to form a joint chip production venture. 

“There are discussions from the Asia supply chain that the U.S. government will get involved in potentially the following: TSMC would send engineers to Intel’s 3nm/2nm fab, applying the company’s know-how to ensure that the fab and subsequent manufacturing projects from Intel become viable,” Baird’s Tristan Gerra told clients. 

Gerra said, “The fab could be spun off into a new entity jointly owned by TSMC and Intel, and run by TSMC. The new entity would receive U.S. Chip Act funding.”

“While there is no confirmation and potential completion of this project could be lengthy, we think this move makes sense,” she noted. 

On a separate note, Goldman’s Bruce Lu, Toshiya Hari, and others provided clients on Friday with a closer look at the JV rumors involving Intel and TSMC: 

Media has speculated that TSMC and Intel (covered by Toshiya Hari) may be forming a joint venture to enhance U.S. chip manufacturing capabilities or that Intel may be considering spinning off its semiconductor fabrication unit to create a collaborative venture with TSMC with TSMC providing technical expertise and engineers to support advanced chip production at Intel’s fabs.

At a glance: Fundamentally, the strategic merit for a potential JV seems unclear as TSMC and Intel operate under different business models and different tool sets which would likely require extra investment e.g. for purchasing/retiring equipment. For Intel and TSMC, even when looking at comparable technology nodes, some processes and equipment used are different. Also, Intel’s equipment is generally for older process nodes, which is not the primary area of focus for capacity expansion for TSMC (i.e. TSMC’s spending currently is mostly for its N2 expansion).

Additionally, TSMC’s business strategy has been to remain independent and avoid entering into JVs that could compromise its neutral status with other clients. More importantly, TSMC’s advanced nodes technology is its own property with proprietary processes, and is a key competitive advantage. Sharing this technology with a direct competitor like Intel could undermine its market position. Additionally, TSMC has historically been very cautious about sharing its intellectual property with other companies, especially with those in direct competition within the semiconductor space. Therefore, a technology transfer agreement between TSMC and Intel would seem uncharacteristic of TSMC’s strategy.

Another outstanding issue is potential anti-trust implications of any TSMC/Intel partnership/JV given the dominant market positions of the two companies. However, to note, Intel and UMC announced a foundry collaboration in January 2024, the two companies will jointly develop a 12nm process platform. UMC will be leveraging Intel’s existing equipment in Intel’s existing fabs, with mass production timeline expected to begin in 2027 (see also: Intel/UMC new foundry collaboration; we view it as a positive strategic move for both companies, 26 January 2024).

The JV rumors have been more than enough to spark buying panic in beaten-down Intel shares. 

There’s a tweet for that. 

Intel becoming a meme stonk?

— zerohedge (@zerohedge) February 13, 2025

Intel may log one of the best weeks on record if gains hold through Friday’s close. 

Here’s Tom’s Hardware’s take on the rumors:

Ongoing geopolitical turmoil, coupled with Intel’s financial and execution struggles, have generated various rumors surrounding the blue giant. In this case, significant technological and business hurdles — ranging from differences in tooling process recipes at Intel and TSMC to TSMC’s lack of incentive to aid a competitor — cast doubt on the feasibility of such a partnership.

. . . 

On Friday just prior to high-level meetings among Western security officials and Ukrainian leadership commenced in Munich, including US Vice President J.D. Vance and Zelensky, there was a dangerous incident at the Chernobyl Nuclear Power Plant in Ukraine’s Kyiv oblast.

Ukraine’s President Zelensky accused Russia of launching a drone equipped with a high-explosive warhead at the historic, defunct power plant, site of the April 1986 nuclear disaster and meltdown. The drone reportedly hit the protective containment shell of the Chernobyl plant.

Zelensky’s office released footage showing damage to the giant concrete and steel shield protecting the remains of the nuclear reactor. BBC writes that “The shield is designed to prevent further radioactive material leaking out over the next century. It measures 275m (900ft) wide and 108m (354ft) tall and cost $1.6bn (£1.3bn) to construct.”

And WaPo writes details further of the looming potential dangers:

In 2019, construction was completed on the New Safe Confinement — a $1.7 billion arch-shaped steel structure, which would contain the destroyed reactor. The site still contained some “200 tons of highly radioactive material,” according to the European Bank of Reconstruction and Development, which helped finance the project.

Thus the situation is deeply alarming given the potential for a new radiation leak at the site which could impact Europe. An IEAE team at the site said it heard an explosion at around 01:50 local time coming from the New Safe Confinement (NSC) shelter. Photos showed flames at the top of the huge structure.

The International Atomic Energy Agency (IAEA) is on high alert, but issued a statement saying the drone strike did not breach the plant’s inner containment shell. The IAEA also did not attribute blame, not identifying who sent the drone.

The Kremlin strongly rejected that it was behind the incident:

“There is no talk about strikes on nuclear infrastructure, nuclear energy facilities, any such claim isn’t true, our military doesn’t do that,” Peskov told reporters in a call.

Russian state media has meanwhile been warning of efforts by bad actors to sabotage Trump’s peace plan for Ukraine, after he held a 90-minute phone call with President Vladimir Putin this week.

Serious damage to the protective shield remains, which could present an ongoing serious safety issue at the site:

Simon Evans from the European Bank for Reconstruction and Development (EBRD) was head of the Chernobyl Shelter Fund, which oversaw the construction of the protective dome in the 2010s.

He described the apparent strike as “an incredibly reckless attack on a vulnerable nuclear facility”.

The shield “was never built to withstand external drone attack”, he told the BBC.

Given this, why would Russia at this very moment while Trump and Putin are trying to line up peace talks launch a high-explosive drone at the Chernobyl Nuclear Power Plant? 

Cui bono?…

Raise your hand if Zelensky is desperate enough to fake a Russian attack on Chernobyl to keep the US from attempting peace talks? Is he that stupid? pic.twitter.com/cQ1dJknhrX

— Remnantee (@HuffmanRobb) February 14, 2025

Zelensky has asserted that Putin is not actually ready for or seeking legitimate negotiations, contradicting recent statements coming from the Trump White House.

On Friday, he claimed: “The only country in the world that attacks such sites, occupies nuclear power plants, and wages war without any regard for the consequences is today’s Russia.”

Meanwhile, Ukraine’s State Nuclear Regulatory Inspectorate has in a fresh statement said that while the drone damaged “the external integrity” of the New Safe Confinement “and equipment in the crane maintenance garage” – it remains that there are no observable radiation spikes. “Firefighting efforts and damage assessment are ongoing,” it added.

Was this a desperate CHERNOBYL 2.0 ATTEMPT? Whodunnit? 

Given that Chernobyl is a name that has captures popular imagination for decades since the apocalyptic historic disaster left the area basically a radiation death zone, it could present the perfect false flag opportunity for anyone wishing to prolong and escalate the war.

French President Emmanuel Macron just ahead of the start of Friday’s Munich Security Conference, which will run through the weekend, declared that only Ukraine’s President Zelensky can negotiate with Putin.

It was a shot across the bow warning against Trump’s peace plan, the contours of which are beginning to show, with the French leader saying it could amount to “capitulation” if Russia isn’t forced to make any serious concessions. 

Macron warned in a fresh interview with the Financial Times that a “peace that is a capitulation” would be “bad news for everyone” – including the United Sates and that fundamentally it must be the Ukrainians driving the talks.

Yet the reality is that Ukraine is not in the driver’s seat on the battlefield, where the conflict is being decided. And the outcome of talks is going to reflect this lack of true military leverage.

Macron continued, “The only question at this stage is whether President Putin is genuinely, sustainably and credibly willing to agree to a ceasefire on this basis. After that, it’s up to the Ukrainians to negotiate with Russia.”

Thus Macron did make clear that he’s open to this “window of opportunity” for a negotiated solution which Trump is jump-starting. He said that “everyone has to play their role.”

There are aspects of Trump’s emerging plan that Macron appears to have welcomed, per the FT:

Nonetheless, the French president endorsed the Trump administration’s position that it was Europe’s responsibility to ensure Ukraine’s security, saying it stemmed from a generational and bipartisan shift in America’s foreign policy priorities away from Europe and towards Asia.

US unilateralism did not start with Trump’s return to power, Macron added, noting that he “did not receive a call” in advance from the Biden administration about its “Aukus” nuclear submarine deal with Australia and the UK or about its withdrawal from Afghanistan. “What Trump is saying to Europe is that it is up to you to carry the burden. And I say, it is up to us to take it on,” Macron said.

Trump policy toward Europe and ending the Ukraine war is now widely being referred to as ‘electroshock’ in various publications after the Macron interview:

The message is clear – an ‘electroshock’, as French President Emmanuel Macron called it: European countries will have to step up defense spending if they intend to protect themselves from Russian aggression.

Macron to the FT : Trump brought “ element of strategic disruption”. It’s for Zelenskyy “alone” to discuss “territorial and sovereignty issues”. And “up to the international community, with a specific role for the Europeans, to discuss security guarantees
https://t.co/5O46RaDf7z

— roula khalaf (@khalafroula) February 14, 2025

Other European leaders have displayed outright anger over what they say is going over Zelensky’s head and showing willingness to deal directly with Putin. German Foreign Minister Annalena Baerbock on Friday blasted the potential for peace talks that would cut out Zelensky or the Europeans.

“A sham peace — over the heads of Ukrainians and Europeans — would gain nothing,” Baerbock said at the start of the security conference. “A sham peace would not bring lasting security, neither for the people in Ukraine nor for us in Europe or the United States,” she added, according to Reuters.

Authored by Jack Ridge via BondVigilantes.com,

This time of year is for thinking about the ones we love. For those of us who spend their working week in the corner of the 7th floor at 10FA, that ‘one’ is bond markets. 

When I was thinking about what I wanted to say in this blog, I was going to write about ‘what to love about bond markets now’. 

But of course, you don’t love only someone or something for what they offer right now, you love them throughout the economic cycle. 

So what are some of the reasons that we have a lifelong love for fixed income?

1. It’s not all about looks, it’s what’s inside that counts

In fixed income, what is on the outside (all-in yields) is important. However, what is under the surface (a combination of the risk-free rate and credit spreads) is even more important, and is the key to a long and happy relationship with the asset class.

An attractive feature of investment grade is the natural in-built hedge. Generally, you will find that when the economy is doing well, credit spreads will tighten as the perceived risk around corporates decreases. The strength of the economy sees greater growth and an uptick in inflation. Consequently, central banks start to raise rates. On the flip side, if the economy weakens, market participants will start to demand a greater risk premium on corporate bonds. In response to this, there is an offsetting effect where the risk-free rate decreases as central banks start to cut rates to support the economy.

In the chart below, we can see that we lost this diversification during COVID as the risk-free rate got down to the zero-bound to prop-up the global economy. However, that diversification is very much back.

That support that you get as a bond investor is certainly something to love!

Source: Bloomberg (31 January 2025). Information is subject to change and is not a guarantee of future results.

2. Bond markets will tell you if they have a problem with you, and not bottle things up

A strong and successful relationship, romantic or otherwise, is built on honesty and trust. There have been many examples over the years of bond vigilante events where the bond market has shown its disagreement with fiscal policy decisions. In the words of Alan Greenspan, ‘the bond market is the ultimate arbiter of fiscal policy.’

The power of the bond market has been shown many times over the years, with the most recent major event being the 2022 ‘mini budget’ in the UK. As we can see in the chart below, 10-year UK gilt yields moved approximately 150bps in the space of less than 10 days. This aggressive repricing was not without consequence. These significant increases in government borrowing costs ultimately led to the resignation of Prime Minister Liz Truss not long later.

Bond markets will certainly not shy away from the tough conversations. With debt-to-GDP ratios in developed markets at all time highs and seemingly only going in one direction, will investors seek to pivot towards countries with lower, more palatable levels of debt (as discussed by Rob Burrows)? Will we see the long end of the curve in indebted developed markets go higher?

Source: Bloomberg (30 September 2022)

3. Bond markets allow you to be you!

In both your view of the market and in portfolio construction, there are many ways to interpret the same data or express a view in a portfolio within the world of fixed income.

From a portfolio construction perspective, access to physical bonds and synthetic alternatives (such as CDS) provide avenues for active managers to exploit relative value opportunities in a variety of ways. The price disparity that is sometimes found between the physical and synthetic market is an example of the perfect imperfections in bond markets, which make this asset class so interesting. Moreover, the ability to unstitch the rate component from the credit component means that fund managers are able to place a view using derivative overlays that may not be possible from a combination of physical holdings alone.

There are various ways to assess value in fixed income. One example is how best to evaluate credit spreads. There are several credit spread metrics which can be used to value corporate bonds, including the additional spread over and above either government bond yields (government OAS), or interest rate swaps (swap OAS).

We will leave the technical deep-dive to another day, but in essence, government bond yields can be influenced by supply and demand dynamics. On the other hand, swap rates are not impacted by the same technical factors. Sometimes spreads over government bonds and spreads over swaps are the same, or very similar. At other times, there is a dislocation. This means that depending on the lens through which you look at credit, corporate bonds could look fair value or expensive. In the below chart, we can see that throughout 2021, both measures in the US market were showing credit spreads to be very similar. However, we are now seeing roughly a 40bp difference.

Which is the correct way to view this? Beauty is in the eye of the beholder!

Source: Bloomberg (31 January 2025)

Bond markets and you – a relationship that lasts a lifetime

We have seen that fixed income has a deep, complex and interesting character, one that continues to foster a strong bond over many years. 

Personally, the diversification in investment grade bonds, the honesty of bond vigilantes, the freedom to express one’s views and the different ways to view the same thing have got me hooked!

The US Treasury’s Department of Inspector General is launching an investigation into “alleged fraudulent payments” found by Elon Musk’s DOGE team, and will analyze the past two years of transactions within the government’s payment system. The IG will also review the security controls to the system after Democratic senators freaked out over the access provided by Trump to Musk and the Department of Government Efficiency.

According to a Friday letter by Treasury Deputy IG Loren J. Sciurba, the audit will take approximately six months.

“We expect to begin our fieldwork immediately,” Sciurba wrote. “Given the breadth of this effort, the audit will likely not be completed until August; however, we recognize the danger that improper access or inadequate controls can pose to the integrity of sensitive payment systems. As such, if critical issues come to light before that time, we will issue interim updates and reports.”

Musk claims to have found massive waste, fraud and abuse – and has launched an official government website for DOGE that will track how large the US government is, and how much DOGE has saved. The site (which still needs a little ‘fine tuning‘) also has an ‘unconstitutionality index,’ which compares the number of rules passed by Congress in 2024 vs. the number of agency rules created out of thin air.

According to the report, the audit comes after Democratic Sens. Elizabeth Warren (MA) and Ron Wyden (OR) pushed for an inquiry at the US Treasury. On Wednesday, Warren, Wyden, and Sen. Jack Reed (D-RI) sent a letter to Treasury Secretary Scott Bessent raising the alarm over DOGE (and not what they’ve found, of course).

“Your lack of candor about these events is deeply troubling given the threats to the economy and the public from DOGE’s meddling, and you need to provide a clear, complete, and public accounting of who accessed the systems, what they were doing, and why they were doing it,” wrote the lawmakers.

In short:

Several lawsuits have also been filed by labor unions and advocacy groups against DOGE’s potential unauthorized access to sensitive Treasury payment systems, while five former treasury secretaries (who ostensibly oversaw massive fraud), have similarly sounded the alarm over what they say are risks associated with DOGE accessing sensitive Treasury Department payment systems.

Of course, if the following is true, DOGE may be 100% within its right to access these systems after actually having been established by the Obama administration.

President Trump and Elon’s brilliant method for setting up DOGE pic.twitter.com/zQY4R9mF6B

— KanekoaTheGreat (@KanekoaTheGreat) February 13, 2025