Eye On The Market

For the last couple of years, investors have wondered how voters would respond to the unorthodoxies of the second Trump Presidency. Now that midterms are over, You Can See Everything: it’s a rout, with the NYT projecting 53 Democratic Senators (plus 2 Independents that caucus with them) and 257 Democratic House members. In this Eye on the Market, we walk through the midterm results and economic/political factors around it, the implicit midterm referendum on AI and the latest AI-related market developments. Also, a section on You Can See Everything, Theranos, Elizabeth Holmes, David Boies, Tim Draper and a history of corporate fraud. Fraud is poison for markets, and investors should be equally unforgiving of people who commit it, condone it, conceal it or protect it.

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Many client questions I received last week in California were laden with a sense of foreboding: third rail questions about the US Federal debt as ten year yields blow through the Bessent Maginot line, the elevated share of US market returns and growth attributable to AI, the sustainability of US equity markets close to all-time highs, Anthropic’s dire warnings about open weight models and cyber risks, rising stress in private credit and European deindustrialization.

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Over the last year, the Eye on the Market included views on sectors, rates and currencies. For this back-to-school piece, I prepared a rear window post-mortem on each.

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The Year of the Trojan Fire Horse: China’s imbalanced economy and unrelenting mercantilism

While there’s plenty of evidence to support Stephen Roach’s thesis of unsustainable imbalances in China’s economy, China is living up to anthropomorphic characteristics of this year’s zodiac, the Fire Horse, in at least one regard: bold moves, self-reliance, speed, action and innovation in the energy transition.

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I mean pretty as an adverb, as in pretty cautious on cyber risks, open and closed weight challenges to the frontier labs seeking to go public and some market technicals related to AI.

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