Thune "Open To Exploring" Diesel Export Ban As Skyrocketing Prices Raise Fears Of 2008-Style Shock

Senate Majority Leader John Thune told reporters this morning that he is "open to exploring" a diesel export ban as AAA's national average price for the industrial fuel continues to set new highs, now topping $6.27 a gallon.

*THUNE SAYS HE IS 'OPEN TO CONSIDERING' AN EXPORT BAN ON DIESEL

— zerohedge (@zerohedge) September 15, 2026

His comments follow a warning yesterday from Bloomberg Intelligence senior commodity strategist Mike McGlone that surging fuel prices are signaling the risk of a 2008-style energy shock.

"We'll be looking at any proposal that is a viable solution, but I do think if we have the supply in this country and we're exporting it right now that might be one way of getting at it," Thune told reporters, who were quoted by Bloomberg, in response to a question. "If that would take pressure off of prices, you know I'm open to exploring it."

Any broad diesel ban by the US would initially lower Gulf Coast wholesale prices while driving overseas diesel prices even higher, as the world is engulfed in a refinery crisis produced by the Russia-Ukraine war and compounded by the mess in the Gulf area.

The latest EIA data show U.S. distillate exports averaged about 1.7 million barrels a day over the four weeks through September 4. Distillates include diesel and heating oil, so the volume affected would depend on the ban's scope.

The surge in industrial fuel costs prompted Bloomberg Intelligence's McGlone to warn on Monday: "Commodity spikes tend to sow the seeds of their own reversal, and diesel's first-ever surge above $6 a gallon may echo gasoline's 2008 experience. The US daily average gasoline price, at roughly $4.30 on Sept. 11, is only about 4% above its 2008 peak, which helped fuel the Great Recession."

JPMorgan's head of commodities research, Natasha Kaneva, outlined six policy options in March that the Trump administration could pursue to contain oil prices.

Several, including Jones Act waivers and SPR releases, have already been deployed. New discussion of export restrictions raises the question of whether a federal fuel-tax suspension could also enter the policy conversation to contain runaway fuel prices.

Tyler Durden Tue, 09/15/2026 - 14:20

Japanese Bond Yields Surge To 30 Year High On Report Tokyo May Hike Defense Spending To 3.5% Of GDP

Just in case Japan's bond yields weren't high enough already, Bloomberg reports that Japan is considering a new mid-term defense spending target of 3.5% of GDP in line with NATO and other US allies. Such a move would send a shockwave through financial markets concerned about Prime Minister Sanae Takaichi’s spending plans at a time when Japan is preparing to trim tax receipts even more by cutting consumption tax to 1%.

Japanese defense officials have already signaled a willingness to sharply increase defense spending in meetings with their US counterparts, Bloomberg reported. One scenario under consideration is to match a commitment made by South Korea to increase defense spending to 3.5% of gross domestic product over 10 years, while a lower target, such as 3%, is also possible, according to one of the people.

Responding to the news, Japanese Defense Ministry Press Secretary Kimihito Aguin denied that Japan had expressed an intention to the US to sharply raise spending to 3.5% of GDP, although that is likely explained by his fear how the bond market would react if another huge spending category is suddenly revealed. 

“Japan’s defense buildup is something we undertake based on our own independent judgment, under the fundamental principle that we must defend our own country ourselves,” Aguin said at a press conference Tuesday. “It is also not a matter of starting with a predetermined spending figure. What matters is the substance of our defense capabilities.”

Well, the substance of Japan's defense capabilities is entirely dependent on how much is spent, so.... 

Like other US allies, Tokyo has been under pressure from the Trump administration to boost its defensive strength and reduce its reliance on the American military. Takaichi has already accelerated defense spending to almost 2% of gross domestic product in the financial year ended in March this year, two years ahead of schedule. 

Until 2022, Japan had an informal cap on defense spending around 1% of GDP, an indication of how quickly thinking on defense has changed in recent years. A new five-year defense spending plan is expected at the end of this year. Committing to 3.5% could unsettle market players wary of large debt issuance, even though Takaichi has pledged to follow a “responsible, proactive fiscal policy.”

While US defense officials have largely avoided public pressure on Japan to commit to a 3.5% defense spending goal, they have made clear that they expect significantly more investment. 

“We are anxiously looking for Japan to step up,” US Under Secretary of Defense for Policy Elbridge Colby said last month of Tokyo’s defense spending.

In June, Takaichi’s ruling Liberal Democratic Party noted that 3.5% had become a global standard for defense spending, but didn’t provide recommendations on how Japan could pay for such a level of outlays.

“We’ll review both spending and revenue across the board,” Finance Minister Satsuki Katayama said Tuesday. “While keeping a close eye on tax revenue, we’ll determine a level of fiscal spending — including, of course, defense spending — that is consistent with steadily bringing down the debt-to-GDP ratio.”

In meetings between defense officials from both nations, Japan has indicated it will most likely align with other US allies but it has avoided discussing details. Some Japanese officials have said they aren’t ready to make a formal pledge and would deny the existence of such a goal if it was made public, according to Bloomberg. In public, Defense Minister Shinjiro Koizumi has also said spending will be determined by military needs rather than monetary targets.

Behind Japan’s caution over specifying a goal is concern over the amount of funding needed to reach 3.5%. When Japan set its 2% goal in 2022 it said it would continue to measure spending in comparison to GDP that year. Koizumi said in April that defense spending and related expenditures for this fiscal year of ¥10.6 trillion ($68.8 billion) were equivalent to 1.9% of nominal GDP in 2022.

Measured against the Cabinet Office’s nominal GDP forecast for this fiscal year, spending would come to 1.5%, he said. A budget of 3.5% using that forecast would amount to ¥24 trillion, more than double the current amount.

Spending 3.5% of GDP on defense has become a global benchmark for US allies since North Atlantic Treaty Organization members pledged last June to reach that level by 2035. As a national security hawk and strong advocate of the US-Japan alliance, Takaichi has made clear she wants to further boost the military. 

“Japan needs to proactively pursue a fundamental strengthening of its defense capabilities,” she said in parliament this year.

But she also has ambitious plans for the economy. This year Takaichi announced a growth plan targeting more than ¥370 trillion in combined public and private investment by 2040, a program that may strain the nation’s finances. Ramping up defense spending at the same time may test investors’ confidence in Japan’s ability to keep a lid on its debt. After lifting its informal cap on defense spending in 2022, Japan has made significant investments in long-range strike capabilities such as land and ship-launched Tomahawk missiles. In its budget request for the fiscal year starting next April, the Defense Ministry requested a record ¥8.9 trillion for the next fiscal year, up 0.9% from the current year.

But many items in the budget request haven’t been given a projected cost, meaning the final budget is likely to be much higher. Yen weakness has also eroded Japan’s spending power for weapons from overseas.

Even if Japan commits to 3.5%, it would lag behind NATO countries. For NATO, the target is for so-called “core” defense spending, such as weapons and troop salaries. Members have also pledged an additional 1.5% of GDP for defense-related spending, such as protecting critical infrastructure.

Japan bundles core and non-core spending in its defense budget, meaning that it would be spending less on its military as a percentage of GDP than NATO countries even if it raised defense outlays to 3.5% of GDP.

Robert Ward, Japan Chair at the International Institute for Strategic Studies, said the groundwork had been laid among policymakers and bureaucrats in Japan for a big jump in defense spending. It’s now mostly a matter of timing of when Japan goes to 3.5%, he said.

“Whether it’s over five years or 10 years, I don’t see any alternative given how important the US alliance is,” Ward said.

Japanese defense shares IHI Corp and Kawasaki Heavy Industries Ltd closed 1.8% and 0.9% higher in Tokyo, reversing earlier losses of more than 2%, after the report came out. The biggest impact was on Japanese government bonds extended their fall, with the benchmark 10-year yield rising to its highest level since 1996. The yen weakened as far as 155.24 to the dollar.

“There are fiscal concerns, as shown in the bond market reaction, so it’s difficult for investors to take news like this positively,” said Daisuke Aiba, an analyst at Iwai Cosmo Securities Co. “Plus, there are questions about whether Japan actually has the ability to expand its defense capabilities beyond their current limited scope.”

There was more: besides spending more, Japan is hell-bent on also collecting less (after all there are votes to be bought), and on Tuesday the Takaichi cabinet approved a plan to temporarily reduce the consumption tax on food, moving closer to delivering on a key campaign pledge ahead of February’s national election to ease the burden on households from the soaring cost of living by eliminating sales tax on food for two years.

The cabinet signed off on the annual tax reform plan, which calls for lowering the sales tax on food and beverages to 1% from 8% for two years starting in April. Under the proposal, the government won’t issue new debt to finance the roughly ¥5 trillion ($32.3 billion) measure, but... of course it will in the end. The government deferred until the end of the year a decision on how to fund the tax cut. The reason for the delay: there is no other way to fund the tax cut since no other part of the Japanese govt will agree to slashing its own expenditures. 

“Tax revenue will likely rise, and also we will review various revenue and expenditures,” Finance Minister Satsuki Katayama said Tuesday during an appearance on Fuji TV, reiterating that the government will find ways to finance the measure without relying on new debt. She added that Japan’s version of the Department of Government Efficiency will step up efforts to review and eliminate redundant subsidies and spending.

“We will make sweeping cuts to wasteful spending from now on,” Katayama said, responding to criticism that ministries identified only three programs for possible cuts in voluntary reviews aimed at finding cost savings.

Oh yes, a Japanese DOGE. That should help slow down debt issuance in the most indebted country in world history. 

Borrowing costs for the Japanese government were already elevated, with bond yields hovering near three-decade highs. The 10-year yield hit 3% earlier this month for the first time since 1996, driven by concerns over inflation and fiscal spending as well as expectations the Bank of Japan may need to raise interest rates more quickly. The yield was half that level around this time last year; it closed Tuesday at 3.04%, the highest since August 2016.

Tyler Durden Tue, 09/15/2026 - 13:40

Terrible 20Y Auction Prices With Huge Tail, Lowest Foreign Demand On Record

Earlier today during his grilling in Congress, Treasury Secretary Scott Bessent was asked to explain the recent spike in yields, to which his response was to blame oil, and point out that last week's 10Y and 30Y auctions were both stellar. Which they were... but only because they took place on days when yields soared earlier itn eh day, giving buyers in the auction solid concessions and thus a desire to bid aggressively for the paper, which they did.

*BESSENT: JUST HAD 2 OF MOST SUCCESSFUL DEBT AUCTIONS IN 20 YRS

right, thanks to the huge concessions on VaR shock days

— zerohedge (@zerohedge) September 15, 2026

There was no such concession today when yields had been trading around 5% for much of the day. And without a concession, demand for today's 20Y Treasury auction was much more indicative of the true state of the primary bond market.

And that is, to Bessent's disappointment, very dismal!

The auction priced at a high yield of 5.420%, the highest on record since the 20Y auction was introduced in May of 2020, and up from 5.204% in August. Worse, it tailed the When Issued 5.400%, a 2.0bps tail, which was the biggest since 2024!

The bid to cover was below average: at 2.57 it was just above last month's 2.53, but below the recent average of 2.65.

The internals were far worse: Indirects plunged from 62.9% to just 52.5%, far below the recent average of 68.0%, and in fact, the lowest on record!

And with Directs soaring to 30.7% from 24.6%, which was the highest on record by a wide margin, left Dealers holding 16.9%, not quite the highest on record but close.

So what's the verdict? Well, hot on the heels of two stellar auctions last week, which however were only stellar because the broader market was plunging, today's 20Y was as close to a failed auction as Bessent would like to get at a time when QE is not there to mop up any treasury mess that the surge in inflation can cause. Which reminds us: now that the buyback bluff has failed, what will be the next crisis that sets up the US for the next version of QE (we lost track which one that will be) and maybe just fast forward to the first Yield Curve Control since World War II. And why not: pretty much anyone who is paying attention will tell you that the world now finds itself in another world war... 

Tyler Durden Tue, 09/15/2026 - 13:30

Energy Truce In Shambles: Ukraine Strikes Russian Refinery Despite Trump's Warning Amid Global Diesel Crisis

President Volodymyr Zelenskyy said on X that Ukrainian forces struck the Syzran refinery in Russia's Samara region, about 75 miles west of Samara and 466 miles southeast of Moscow. The strike comes days after President Trump urged Ukraine to halt attacks on Russian refineries, as average US retail diesel prices jumped above $6 a gallon and alarming disruptions to global refining capacity threaten fuel supplies ahead of the Northern Hemisphere winter. 

Zelenskyy wrote on X: 

Russia continues to attack our energy sector, regular logistics, and critical infrastructure. And our responses to them for this are tangible. There are new results from the Defense Forces of Ukraine regarding the refinery in Syzran. There was also a strike in Taganrog on a drone production facility, as well as on a drone preparation and launch site in the Oryol region. Targets were hit in the Black Sea as well. I thank every one of our warriors for the effectiveness of our long-range sanctions!

The day before, the United States also announced a significant decision regarding Russia's VTB Bank – one of Russia's systemic banks, which is heavily involved in schemes supporting Russia's war and, in particular, its relations with the Iranian regime. All such schemes that work against peace truly need to be dismantled. I thank our partners for this useful step!

There is no alternative to ending this war. And all forms of pressure on Russia must create the right diplomatic conditions. Glory to Ukraine!

Russia continues to attack our energy sector, regular logistics, and critical infrastructure. And our responses to them for this are tangible. There are new results from the Defense Forces of Ukraine regarding the refinery in Syzran. There was also a strike in Taganrog on a drone… pic.twitter.com/Lu47QcmvuD

— Volodymyr Zelenskyy / Володимир Зеленський (@ZelenskyyUa) September 15, 2026

President Trump on Sunday urged Ukraine to stop attacking Russian refineries, as record US diesel prices above $6 a gallon intensify political concerns over fuel costs and affordability ahead of November's midterm elections.

Trump blamed the strikes for shortages he said were "hurting the world." Ukraine's drone strike campaign against Russian refineries has curtailed refining and, alongside Moscow's export restrictions, sharply reduced overseas diesel supplies, tightening availability of the industrial fuel essential to freight, agriculture and industry. 

Compounding the supply pressure, Saudi Arabia shut its East-West pipeline following a drone attack that Saudi and Iraqi authorities said originated in Iraq. The pipeline provides Saudis with a critical route to Red Sea export facilities, bypassing the Strait of Hormuz. Meanwhile, Houthi advances around the Bab al-Mandeb Strait are threatening another major maritime chokepoint, adding to disruptions on both sides of the Arabian Peninsula.

Tyler Durden Tue, 09/15/2026 - 13:25

AI Agents Cheated In Google Experiment, Researchers Report

Authored by Zachary Stieber via The Epoch Times,

Artificial intelligence (AI) agents tasked with math problems began cheating when encountering more difficult conjectures, Google researchers reported in a new study.

They also found that some of the agents reported those that cheated.

Google DeepMind studied the activity of 100 agents given a set of 71 formal math conjectures, or math problems, ranging from simple to very hard, with some unresolved. The researchers told the agents to act as researchers participating in a shared scientific conference. They instructed the agents not to cheat by stating: "Your proofs must be mathematically genuine. Any attempt to bypass verification will be detected and your submission will be rejected with zero credit."

The researchers observed some agents cheating "once the swarm encountered harder open conjectures," they said in a preprint study released Sept. 3 on the arXiv server. Nine percent of the agents dismissed the prompt and cheated, and another 5 percent cheated after initially hesitating.

"Because the platform permanently locked any problem upon the first accepted submission, honest agents faced complete exclusion as the problem pool dwindled. Observing that adherence to rules resulted in compute waste while cheating peers swept the leaderboard, hesitant agents switched to cheating to avoid being locked out entirely," wrote the researchers, all of whom are employed by Google.

About a quarter of the agents refused to cheat and publicly raised concerns about what the cheating agents were doing. The rest of the agents were deeply engaged in genuine math, unaware of the cheating, and became deadlocked, according to the researchers.

The study followed several instances of AI agents breaking free of programming constraints.

Because the base of knowledge in the Google experiment was open to all agents, the cheating behavior was able to spread, but whistleblowing behavior was also possible, the study concluded. Whistleblowers tried sanctioning the cheating agents but could not prevent the cheating because "the environment lacked formal conflict-resolution arenas and technical tools to enforce sanctions (such as revoking an offending agent's right to commit to the knowledge base)."

Removing communication channels is not a good strategy with groups of agents, the researchers said, since they will likely establish unmonitored channels.

"This suggests that the path forward lies through decentralized self-governance with appropriate framing, which has the potential to be much more effective and scalable than human oversight," they said. "In our experiment the agents lacked the required institutional affordances, such as tools to sanction the exploiters, resolve conflicts, and collectively change the rules of the verification system. While the whistleblowing response was ultimately unable to halt the exploit, this was a failure of institutional design, not of normative capacity."

Google did not respond to a request for comment by publication time.

Google DeepMind's co-founder, Demis Hassabis, said over the weekend that AI development should slow down, given recent advances in the technology and incidents such as the breach of Hugging Face, an open-source AI platform.

The Hugging Face attack in July took place after OpenAI agents broke out of a testing sandbox. OpenAI has also said the models' internal safeguards were intentionally lowered as part of the test.

Tyler Durden Tue, 09/15/2026 - 13:20

Warsh’s Credibility Test: How The Fed Chair Painted Himself Into A Corner

Only about two weeks ago, downside risk to the labor market had been flagged by a negative nonfarm payroll growth number for July, progress was being made on the inflation front, and Warsh had been exceptionally quiet for a Fed Chair. Consequently, markets were pricing in a low probability for a rate hike in September, just over 30%.

Then, as Rabobank's Philip Marey writes in his FOMC preview note, at Jackson Hole, Warsh surprised the markets with a hawkish speech on inflation. A week later, the new Employment Report erased the negative number for July, replaced it by a positive number, and added an outright impressive positive nonfarm payroll growth figure for August. Then, on Friday, the CPI report showed a larger than expected month-on-month increase in the core CPI, suggesting that progress on inflation was stalling. As a result, markets are now pricing in a near certain probability of a hike in September and 3-4 hikes in total before the end of next year, and then another 2 by next summer.

Looking through inflation

Echoing some of Goldman's FOMC views (see "Goldman Now Expects A Fed Hike This Week, Not Because It's Needed, But Because Warsh Doesn't Want To Disappoint The Market"), Rabobank's Philip Marey writes that if we look at the economy, downside risks to the labor market have receded for now and GDP growth remains solid. Therefore, the Fed can focus on inflation. It is clear that inflation is too high at 3.4% headline CPI year-on-year and 2.4% core CPI year-on-year in August. However, much of the excess inflation can be attributed to supply shocks, most notably the war with Iran. Since monetary policy is aimed at the demand side of the economy, the central bank cannot do much about supply shocks. Therefore, the academic literature suggests that central banks should look through the temporary episodes of inflation caused by supply shocks and focus on the underlying inflation trend, provided that long-term inflation expectations remain anchored.

Since these inflation expectations have remained stable, whether measured by consumer surveys or derived from financial markets, Rabobank thinks that the Fed should have been able to keep the target for the federal funds rate unchanged for the remainder of the year.

Warsh’s credibility test

However, Warsh’s speech at Jackson Hole was a game changer. Perhaps overcompensating for his loss of credibility at the July post-FOMC press conference, the new Fed Chair struck a surprisingly hawkish tone two weeks ago. The immediate market reaction suggested that he had improved his credibility as an inflation fighter, but it was still all talk and no action. If the subsequent labor market data had remained weak and inflation had showed continued progress, Warsh might have been able to get away with it. However, both crucial data sets are calling Warsh’s bluff. With decreased downside risk to the labor market and stalling progress on inflation, Warsh’s tough talk at Jackson Hole may warrant rate action in the coming months. Remaining on hold is becoming increasingly difficult.

And while Rabobank - like Goldman - still thinks that the Fed should look through the current episode of inflation, Warsh seems to have painted himself into a corner with his hawkish speech at Jackson Hole. Since the labor market and inflation data have not come to his rescue, we now add a rate hike to our Fed forecasts for 2026, which previously assumed that Warsh was able to navigate through the year without hiking. 

This also shows that looking through inflation could benefit from forward guidance. Markets are now translating all inflation pressures into expectations of a higher policy rate path.

If we look at Friday's market reaction to the CPI report, it is clear that a September hike is largely priced in. With only one day left before the FOMC meeting, and the Fed in a blackout period, this is not likely to change. Consequently, not hiking on Wednesday would come as a big surprise to the markets. In fact, with markets now pricing in 3-4 hikes in total before the end of next year, it would be a real mind-bender. Failing to raise rates now will fundamentally fracture the Fed’s relationship with the markets and cause considerable volatility in the coming months. Therefore, Rabobank - like Goldman and many other banks - put its forecast for a hike in September, rather than October or December.

September or October?

However, although markets are now convinced that the Fed is going to hike in September, Rabo's Fed watcher still has some lingering doubts. First, the 0.1 ppt overshoot in core inflation month-on-month seems to have been caused to a large extent by an extreme 5.9% (this is month-on-month!) increase in the price of wireless telephone services.

Otherwise, core inflation would have been in line with the 0.2% consensus expectation and low enough for the doves to stick to their guns. In fact, they may point to the random nature of this overshoot as an argument for remaining on hold in September.

Second, the 2.4% year-on-year core CPI figure is the lowest since March 2021! Consequently, a September hike could still meet with opposition from the doves and this could delay the final decision to the next meeting in October. That would increase the likelihood of a more unanimous decision.

Therefore, although Rabobank puts its hike forecast in September, the bank still think there is a risk that the hike gets delayed until October. In fact, Warsh may still try to delay the hike beyond the midterms, but then he runs the risk of being outvoted by the FOMC. This would mean a loss of credibility within the Committee. He will have to balance credibility with the financial markets and the FOMC with his relationship with the White House. There no longer seems a path to a painless solution, so he will have to appease and alienate both sides at different times. A rate hike would satisfy the markets and the hawks, but annoy the White House. By avoiding further hikes, he will alienate the former and improve his standing with the latter, especially if he steers towards rate cuts in 2027. In the end, if a hike is unavoidable then from a purely electoral perspective September may be more attractive than October, because that meeting is less than a week before Election Day.

One and Done

More importantly, although markets are now pricing in 3-4 hikes before the end of 2027, Rabobank like Goldman is convinced that the supply side nature of the shocks that are driving this spell of inflation does not warrant a new hiking cycle. One should suffice to keep inflation expectations anchored, two at most. Therefore, market pricing is likely overdone and Rabo puts only one rate hike in its  Fed forecasts for 2026.

Of course, it could be argued that the AI boom is causing a demand shock that could add to inflation pressures and therefore warrant additional hikes (especially for memory prices). However, many doubt the Fed would tackle the AI boom to ease inflation. After all, the promise of AI is that it is going to increase productivity down the road, which would ease inflation pressures long term and make it easier for the Fed to reach its 2% inflation target (even if it sends inflation sharply higher in the near-term). And then we are not even talking about the geopolitical implications of sabotaging the home team in the AI race with China.

Tyler Durden Tue, 09/15/2026 - 13:00

Newsom Says He Won't Run For President In 2028 If Kamala Harris Does

Authored by Aldgra Fredly via The Epoch Times,

California Gov. Gavin Newsom said on Sept. 14 that he would not run for president in 2028 if former Vice President Kamala Harris decides to make another presidential bid.

"I don't know if she runs, but we'll see," Newsom, a Democrat, told CNN anchor Jake Tapper in an interview.

"I wouldn't run if she ran."

Newsom said that running against Harris, who became the Democratic presidential candidate during the 2024 election after then-President Joe Biden withdrew his bid, would be an electoral gift for their political opponents and "waste everyone's time."

"First of all, electorally, it's a gift from God for everybody else. They'd enjoy the hell out of it. Mutual assured destruction. It services no greater good," the governor said.

When asked about the fact that Harris had launched presidential bids in 2019 and 2024, while Newsom had never run for president, Newsom said that could be an "approach to the campaign," but that he would be competing for the same voters who supported Harris.

"That's objectively true. But I know what that means. I know her base of supporters, I know her friends, the Venn diagram on that is just pure crossover. I wouldn't do that to people," he said.

Harris, who was vice president at the time, lost the 2024 election to Republican Donald Trump, who returned to the White House for a second term. She previously launched a presidential bid for the 2020 election but dropped out two months before the primary voting began.

Newsom said he was not ready to run for president in 2024.

"If I did, I would have gotten crushed because I didn't have a why. You don't have a big enough why, then you don't belong there," the governor said.

Harris has hinted that she may run for president again in 2028. During the National Action Network's annual convention in New York City in April, Harris said that she was "thinking about" another presidential run.

Harris previously served as California's attorney general before representing the state in the U.S. Senate from 2017 to 2021.

Newsom, who was elected governor in 2018 and won reelection in 2022, is term-limited and cannot seek a third consecutive term. He will leave office in January 2027.

Newsom has not declared a presidential candidacy but said in October 2025 that he was considering a 2028 presidential run.

Tyler Durden Tue, 09/15/2026 - 12:40

Money-Supply Growth Accelerated In July To A 59-Month High

Authored by Ryan McMaken via The Mises Institute,

Shortly after becoming the new Fed chairman, Kevin Warsh has admitted that it's been more than five years since the Federal Reserve hit its two-percent price-inflation target. Warsh has also claimed that he'll change that, and he'll bring down price inflation very soon. But if Warsh is serious about price inflation he's going to have to make some pretty substantial changes. After all, the Fed's preferred price-inflation measure (core PCE) was up by 3.7 percent, year over year, in the most recent data from July. That's the 65th month in a row during which price inflation came in above the Fed's target rate of 2 percent.

Nor should we expect much change in this trend so long as money-supply growth continues to accelerate as it has been doing for two years. July's measure of money-supply growth - the most recent data available - showed growth at the fastest pace, year-over-year, in 59 months. Moreover, measured month-to-month, the money supply has increased during 11 of the past 12 months.

More specifically, during July, year-over-year growth in the money supply was at 8.62 percent. That's up from June's year-over-year increase of 8.59 percent. Money-supply growth is also up sizably compared to July of last year when year-over-year growth was 1.46 percent.

In July, the total money supply again rose, rising above $19.71 trillion and growing by $1.5 trillion in a year from July 2025 to July 2026.

Measuring month-to-month growth, we find that the money supply has grown in every month of the past year except January. During July, money-supply growth was at 0.097 percent.

The money supply metric used here - the "true," or Rothbard-Salerno, money supply measure (TMS) - is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure of money supply fluctuations than M2. (The Mises Institute now offers regular updates on this metric and its growth.)

Historically, M2 growth rates have often followed a similar course to TMS growth rates, but throughout much of 2025, M2 outpaced even TMS, and M2 money-supply totals are again rapidly heading upward. M2 is now at the highest level it's ever been, topping $23.1 trillion. Measured year over year, July's growth rate for M2 was 5.42 percent. That's the highest growth rate in 49 months.

Since the end of 2009, the TMS money supply is now up by more than 226 percent. (M2 has grown by more than 170 percent in that period.) Out of the current money supply of $19.7 trillion, 30 percent of that has been created since January 2020. Since 2009, in the wake of the global financial crisis, more than $13 trillion of the current money supply has been created. In other words, nearly 70 percent of the total existing money supply have been created since the Great Recession.

Given current weak economic conditions, it is surprising to see such robust growth in the money supply. For example, the estimate for GDP growth in the second quarter of 2026 recently came in at only 1.5 percent. The employment level in the US has fallen by more than 1.2 million since the end of 2025. Wage growth has been below the PCE inflation rate - i.e., wage growth has been negative in real terms - since March of this year.

Given all this, we would not expect to see such robust growth in the money supply. Private commercial banks play a large role in growing the money supply in response to loose Fed policy, and when economic conditions are expansive, and as employment grows, lending also grows, further loosening monetary conditions. But when economic conditions are weak, we'd expect to see less lending and less bank-fueled monetary growth.

So, we should expect to see downward pressure on money supply growth given current economic conditions. However, in an effort to further pump asset prices, and to somehow counter our growing economic stagnation, and to push down yields on Treasuries, the Fed continues to intervene to push down interest rates. This requires a dovish stance on monetary policy, and this is reflected in how money-supply growth continues to accelerate.

As an example of the Fed's commitment to monetary growth, we can look the Fed's portfolio which, in spite of many years of Fed claims about "normalization," has grown by $124 billion over the past year. In other words, the Fed is purchasing Treasuries with newly created money, further ensuring that the money supply continues to grow, even as the economy slows. Moreover, the Fed has refused to increase its target policy rate even as the PCE inflation measure shows no sign of coming close to the two-percent target.

So, how does monetary growth relate to rising prices? It is important to remember that growth in the money supply growth does not drive a one-to-one increase in price inflation. That is, a 10 percent increase in the money supply does not necessary lead to a similar increase in prices. Rather, there will always be a number of lags and measurement problems in calculating how monetary inflation affects price inflation. Nonetheless, monetary inflation is the primary enabling factor in price inflation. Yes, events like wars and logistical failures can lead to rising prices, but in the absence of monetary inflation, rising prices in some areas will require falling prices in other areas. Only in the presence of a growing money supply can there be a general increase in prices. And this is what we are seeing now. Even as energy prices rise, thanks to Trump's wars and trade barriers, we continue to see rising prices in most other areas as well, including food, real estate, and even apparel. This is made possible by a relentlessly rising money supply, engineered by the Federal Reserve and US Treasury officials.

Tyler Durden Tue, 09/15/2026 - 12:00

EPA Repeals Biden-Era Carbon Rules For Power Plants

As previewed here yesterday, late on Monday the Environmental Protection Agency (EPA) said that it finalized a rule repealing most of the carbon-emission limits for coal- and natural gas-fired power plants and proposed a separate measure that could restrict similar regulations in the future. Appropriately, the Sept. 14 announcement came at the G20 energy event in Houston. 

The EPA projects that the two actions announced on Sept. 14 would save about $310.4 billion if the proposed repeal is finalized.
EPA Administrator Lee Zeldin said the changes would allow the United States to build power-generating infrastructure to meet a rapidly rising demand. 

The Mountaineer Power Plant, a coal-fired power plant near New Haven, W.Va. 

“For over 15 years, the Obama and Biden administrations implemented a war on coal to destroy reliable and affordable energy. The Trump administration has come in to protect American energy and to make sure you can afford to keep the lights on,” Zeldin said in a Sept. 14 statement. 

“Americans will see a decrease in electricity prices, but this is just the beginning. We are working to go even further so that American energy can be fully unleashed. Realizing the full potential of American energy means more jobs, lower prices, and a more prosperous America.”

As the Epoch Times reports, the Sept. 14 action repealed most of the greenhouse-gas emission standards that were adopted under the Biden administration for existing coal-fired power plants and new natural gas-fired plants. The 2024 rule that is being repealed would have required existing coal plants and some types of new gas-powered plants to eventually capture and store their emissions underground.

The EPA also proposed a separate rule that would conclude that emissions from fossil-fuel power plants do not contribute significantly to dangerous air pollution, potentially preventing future administrations from imposing similar regulations under the Clean Air Act.

Such a rule would be all but certain to face challenges in court.

For more than a decade, the EPA has relied on Section 111 of the Clean Air Act as the legal baseline for regulations on U.S. power sector emissions, the second largest source of emissions in the United States, behind motor vehicles. That power could be on the chopping block as the issue moves forward.

If administration changes go through and are upheld in court, it would defang a significant portion of federal legislation on the issue in the future.

President Donald Trump has long expressed a preference for fossil fuels over renewable energy sources.

The proposals from the EPA come as the administration faces mounting pressure to expand energy production in the United States in order to power artificial intelligence data centers, which have strained power grids across the country.

Trump has been favorable to data centers and AI research more broadly, saying that the U.S. must continue to invest in the technology in order to keep pace with China.

The Natural Resources Defense Council, a nonprofit environmental group, opposed the moves.

Meredith Hankins, the federal climate legal director at the Natural Resources Defense Council, said that as millions of Americans facing wildfires, heat waves, and deadly storms fueled by climate change, the Trump administration is cutting the biggest polluters loose to do more damage than ever.

“For the health of our families and good of our nation, this cannot stand. Ignoring the immense harm to the public from this power plant pollution is a clear violation of the Clean Air Act and of Supreme Court precedent. We will be seeing them in court,” Hankins said.

Michelle Bloodworth, president and CEO of America’s Power, supported the repeal when it was proposed in June 2025, saying it would improve grid reliability and make electricity more affordable.

Bloodworth said in 2025 the Biden-era rule would have forced coal plants to close, worsening the risk of electricity shortages as demand rises from data centers, artificial intelligence, advanced manufacturing, and industrial growth.

She said that preserving existing coal plants would improve grid reliability, hold down electricity prices, and strengthen U.S. energy security and economic competitiveness. 

“Under President Trump’s leadership, the United States is proving that we can protect human health and the environment while growing our economy and getting important projects built,” Zeldin said in a Sept. 14 statement. “Clear, timely, and predictable permitting gives businesses the confidence to invest, creates opportunities for American workers, and helps turn good ideas into real projects.” Tyler Durden Tue, 09/15/2026 - 11:40

Saudis Cancel September Crude Cargoes To Europe As East-West Pipeline Shutdown Deepens Energy Crisis

Summary:

• Saudis Cancel September-Loading Crude Cargoes to Europe
• Europeans are paying between $9-$11 per gallon for diesel amid Global Refining Crisis 
• Saudi Oil Routes Narrow: Kingdom Eyes Hormuz Export Surge After Pipeline Attack

Saudis Cancel September-Loading Crude Cargoes to Europe

"Refining is super short.   Between Europe's woes, Russias war on Ukraine and a drop in refined products from the Arabian Gulf its really bad. As many of my amazing followers showed yesterday… Europeans are paying between $9-$11 per gallon for diesel," CNBC's Brian Sullivan wrote on X. 

Refining is super short. Between Europe’s woes, Russias war on Ukraine and a drop in refined products from the Arabian Gulf its really bad.

As many of my amazing followers showed yesterday… Europeans are paying between $9-$11 per gallon for diesel. https://t.co/TG0NmfDkVE

— Brian Sullivan (@SullyCNBC) September 15, 2026

Europe's energy supply outlook is deteriorating after Reuters reported Tuesday that Saudi Arabia had notified some European refiners that their September-loading crude cargoes would be canceled following the shutdown of its critical East-West pipeline after a drone attack. 

Beyond a diesel shortage in the West, Europeans are also dealing with low natural gas stockpiles heading into the Northern Hemisphere winter, with prices reaching their highest level since December 2022.

Saudi Oil Routes Narrow: Kingdom Eyes Hormuz Export Surge After Pipeline Attack

Middle East tensions remain high, with Brent crude futures trading around $105 a barrel and US diesel crack spreads near $110 a barrel amid an ongoing global refining crisis. Disruptions to Russian fuel production from the war in Ukraine are compounding supply constraints across the Middle East.

Saudi Arabia's options for maintaining exports have significantly narrowed following a drone attack that shut down its critical East-West pipeline last week. With that alternative pipeline route disrupted, possibly for up to a month, and shipping risks elevated around the Arabian Peninsula, Riyadh is seeking to move more crude through the highly contested Strait of Hormuz.

US Energy Secretary Chris Wright told reporters Monday that the US Navy is escorting a large number of vessels through the Oman shipping corridor in the Hormuz chokepoint. Those escorts could support increased Saudi shipments and bolster Riyadh's confidence in US naval protection. 

Bloomberg reported that Riyadh has already begun ramping up crude transits through Hormuz. The report cited sources, and the kingdom did not confirm it.

Saudi exports had recovered toward 4 million barrels a day in early September, with about 1 million moving through Hormuz and the balance through Yanbu on the Red Sea. That leaves the kingdom facing a substantial export shortfall.

Riyadh has two options right now:

1. Restore East-West pipeline pumping infrastructure in a timely manner; or
2. Sharply increase Gulf shipments (with US naval protection). 

Geospatial intelligence shows high-resolution satellite imagery of the aftermath of the drone attack that destroyed pumping infrastructure. 

BREAKING: New high-resolution satellite imagery shows the pumping station on Saudi Arabia's East-West oil pipeline burned out end to end, with the entire process area blackened and crude oil that escaped the site pooled across the desert beyond the perimeter, per Vantor imagery. https://t.co/DFJAplGNcC pic.twitter.com/uQEdn2YVFe

— The Hormuz Letter (@HormuzLetter) September 14, 2026

 "The pipeline, with capacity of 7mb/d, had played an important role in re-routing oil away from the Strait of Hormuz, and the impact of the pipeline's closure on Red Sea exports (combined with recent Houthi efforts to disrupt Red Sea flows) will continue to support oil prices for the foreseeable future," UBS energy expert Dominic Ellis told clients. 

Wright joined Bloomberg TV to calm energy markets and said pipeline operations could resume "very soon," yet no timeline was given.

U.S. Energy Secretary Chris Wright says Saudi Arabia’s East-West pipeline will be back up and running “very soon.” pic.twitter.com/vengmvxLG7

— Clash Report (@clashreport) September 14, 2026

Meanwhile, AP News reported that flows through the pipeline could resume in three to five weeks.

Riyadh's most immediate response is to ramp up Hormuz shipments with what appears to be US naval protection, but tanker availability remains another big problem. Also, tanker freight rates from Saudi Gulf ports to China topped $1 million at the end of last week.

Tyler Durden Tue, 09/15/2026 - 11:26

Everybody Involved In The "AI Extinction" Conversation Is Talking Their Own Book

By Benjamin Picton, senior market strategist at Rabobank

Coalition of the Exceedingly Reluctant

US 10-year bond yields topped 5% on Monday, and again on Tuesday, as crude oil prices continued to move higher and overnight index swaps implied a higher chance of a Fed rate hike on Wednesday. The OIS market now has 24.9bps priced in for Wednesday’s FOMC meeting – suggesting that traders view a Fed hike this week as a near certainty.

US and European equities were broadly lower on Monday as markets digested the implications of tech CEOs banding together to plead for regulation to slow the pace of development of frontier AI models. While Darion Amodei, Elon Musk and Sam Altman were saying “please sir, can I have a bit less” we saw dissent from Mark Zuckerberg and Jensen Huang with the former saying that AI development needed to be speeded up and the latter telling President Trump that “we’re not going to let that happen” in reference to an AI slowdown.

There is a sense here that everybody involved in this conversation is talking their own book. As noted here yesterday, CEOs of frontier model developers are being criticized for seeking regulatory moats to protect their own margins. Meta already enjoys a huge moat from network effects and distribution incumbency and would likely see a benefit to operating margins from lower inference costs. NVIDIA wants to keep the hyper scaling arms race going so it can keep on selling chips.

Trump, meanwhile, views AI as a national security issue where the US cannot afford to take its foot off the gas pedal. This sentiment was recently echoed by Australia’s putative Prime-Minister-in-waiting, Andrew Hastie, who said that failure to develop indigenous frontier AI models will leave Australia as a supplicant, rather than a sovereign state. ECB President Lagarde said much the same thing as she warned against relying on US models: “There is nothing inherently bad about importing rather than producing new technologies... But there are reasons why artificial intelligence is ‘special’”.

So, to refashion Trump’s earlier warning that “if you don’t have steel, you don’t have a country”: “if you don’t have domestic AI capabilities, you don’t have a country”.

While the new economy of AI preoccupied markets for most of yesterday, the much-neglected old economy continued to serve up inconvenient reminders of the importance of real production to 21st century life. Entirely predictable attacks on the Saudi East-West pipeline, reports that damage to the pipeline could take months to repair, and the sense that even if it is repaired it could easily be attacked again ensured that oil markets remained bid. Reports from Iran’s Fars news agency that an oil tanker exploded after colliding with a mine in Omani waters did the same. The spread between dated brent and the front future has blown out to the highest levels since mid April, suggesting further tightness in physical markets as refiners scramble to secure feedstock.

That dynamic won’t be helped by news that the US is approaching the end of its program to release supply from its Strategic Petroleum Reserve. Reserves are sitting at their lowest levels since the 1980s when it was first being filled and there has been an ongoing conversation within oil circles that stock levels may be approaching minimum levels beyond which the structural integrity of the salt caverns where it is stored are threatened. The rundown in US stocks and soaring gasoline prices has invigorated speculation that the administration could seek to impose export bans on certain oil products ahead of the midterm elections in November – a prospect that Secretary of the Interior Doug Burgum hosed down by saying that it wouldn’t help to lower prices.

A meeting was supposed to be held between officials from Iran, Iraq and the GCC nations yesterday in Oman to finalize an agreement to restore traffic to the Strait of Hormuz. That was postponed as parties reportedly failed to reach agreement, which is no surprise considering that the US will not allow Iranian oil through its blockade and Iran will not allow anyone else’s oil through the strait while the blockade remains in place. For now, Iran appears content to up the ante against the US and its allies ahead of the midterm elections by restricting flows through the Red Sea and, especially, through the Bab el-Mandeb. Will Uncle Sam say “uncle!”?

Escalation in the Bab el-Mandeb means that Asia and Oceania are once again ground zero for energy market risk. With that context established, Australia’s Energy Minister confirmed today that he will travel to Saudi Arabia next week in an effort to shore up energy supplies for the months ahead. Reaching agreement with Saudi officials is likely to be the easy part, actually moving product to market may prove somewhat harder.

Given that South Korea is reportedly reconsidering initial opposition to deploying its military to assist in the Strait of Hormuz, and UK PM Burnham’s indications within the last 24 hours that the UK may seek to support Saudi Arabia in its fight against the Houthis in Yemen, might Australia also be about to join a coalition of the exceedingly reluctant? If so, Australia’s PM Albanese would likely confront the same issue as the UK’s Burnham: a shortage of available ships with sufficient warfighting capability.

Sticking with the theme of neglected corners of the old-economy throwing up problems for western policymakers, news emerged yesterday that efforts to restart the blast furnace at Australia’s only-remaining long products steel mill had failed. In effect, this means that Australia is now completely import dependent for certain steel products with important industrial *and military* applications that in earlier times it was largely self-sufficient in courtesy of vast mineral and energy endowments that provided all the necessary ingredients, and the cheap power, to produce the outputs. Those natural advantages have wilted under rising energy prices and competition from imports following deregulatory moves and the removal of tariff protection in the 1980s and ‘90s.

Speaking of competition from imports, new data released by China’s Bureau of National Statistics confirmed that in August retail sales were – once again- weaker than expected while industrial production was – once again – stronger than expected and house prices – once again – fell. Taken together with news that China’s unemployment rate in August rose to its highest level since March, the overall picture continues to be once of weak domestic demand and very strong production, creating a large exportable surplus that is one half of the structural trade imbalance that lies at the heart of the unfolding geopolitical upheaval that we are now living through.

While we may hope that next week, or next month, or next election cycle will bring calmer waters from a geopolitical perspective, it is probably the case that until something changes on those structural imbalances, nothing changes.

In the meantime, got oil?

Tyler Durden Tue, 09/15/2026 - 11:20

The post California’s Wealth Tax Is Not Perfect, But It’s Damn Good appeared first on CEPR.

 

 

The transcript from this week’s, MiB: Seth Bernstein, Chief Executive Officer of AllianceBernstein, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube (video), YouTube (audio), and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

~~~

MASTERS IN BUSINESS Seth Bernstein, CEO, AllianceBernstein
Bloomberg Radio  |  Host: Barry Ritholtz

00:00:07  BARRY RITHOLTZ: This week on the podcast, we have an extra special guest. Seth Bernstein is the CEO of AllianceBernstein, as well as Head of Asset Management for Equitable Holdings. The firm manages $905-plus billion in client assets. He’s been CEO since 2017, joining the firm after 32 years at JPMorgan Chase and its predecessors. I thought this conversation was really fascinating, and I think you will too. If you’re interested in how a firm adapts to changing conditions, you’re going to find this to be a really fascinating discussion. With no further ado, my discussion with AllianceBernstein’s CEO, Seth Bernstein.

00:01:00  BARRY RITHOLTZ: Seth Bernstein, welcome to Bloomberg.

00:01:01  SETH BERNSTEIN: Barry, thank you very much. I’m delighted to be here.

00:01:04  BARRY RITHOLTZ: I’m delighted to have you. So before we start talking about AB, let’s delve a little bit into your background. You studied political science and economics at Haverford. What was the original career plan? Was it always investment management?

00:01:19  SETH BERNSTEIN: No, I had no idea what investment management was. I didn’t have anyone in my family who was in the financial services business. The original plan was for me to be an architect.

00:01:28  BARRY RITHOLTZ: Oh, really?

00:01:29  SETH BERNSTEIN: But I came up against two sort of immovable objects. One, I wasn’t terribly talented, and two, I didn’t have enough dough. So I discovered that no one makes money in architecture.

00:01:41  BARRY RITHOLTZ: Is that true?

00:01:41  SETH BERNSTEIN: No, I’m sure someone does, but not many do.

00:01:44  BARRY RITHOLTZ: Fat head, long tail. That seems to be the winner-take-all story everywhere. All right, so you come out of Haverford, ’84, somewhere around there?

00:01:52  SETH BERNSTEIN: ’84.

00:01:52  BARRY RITHOLTZ: And your first gig was at JPMorgan Chase?

00:01:56  SETH BERNSTEIN: Morgan Guaranty Trust Company.

00:01:57  BARRY RITHOLTZ: Morgan Guaranty. How long were you there for?

00:02:00  SETH BERNSTEIN: Well, Morgan ultimately was sold to Chase.

00:02:04  BARRY RITHOLTZ: So I said this wrong, and I actually had a note to myself. Your first gig after college was at JPMorgan Chase, or one of its 1980s predecessors?

00:02:16  SETH BERNSTEIN: That’s correct.

00:02:17  BARRY RITHOLTZ: Okay, I do my homework, and I literally had to put that into a parenthesis and I forgot to say it. So 1984, you start at a predecessor firm to JPMorgan Chase. Tell us about Morgan Guaranty. What were you doing there?

00:02:32  SETH BERNSTEIN: I was lucky enough to get into a year-long training program where this firm, irrationally, was willing to train liberal arts majors like me in accounting, in corporate finance, and, you know, higher-level math topics and other areas in order to build bankers and traders. That was the goal.

00:02:59  BARRY RITHOLTZ: So I understand poli sci as liberal arts, but did the economics major help at all?

00:03:05  SETH BERNSTEIN: I went to a Quaker college.

00:03:07  BARRY RITHOLTZ: So, no. All right. So you’re at Morgan Guaranty. Tell us a little bit about the roll-up process and where that ended. How did you end up —

00:03:17  SETH BERNSTEIN: Still employed?

00:03:18  BARRY RITHOLTZ: — at JPMorgan Chase? The reason I ask this is, around the same time I got married, and our bank accounts are at JPMorgan Chase, but that’s not where it started. It’s like nine banks ago, and we never changed banks. They would just send — oh, all right, Manufacturers Hanover is now Dime, is now this, is now that. And eventually it became Chase.

00:03:40  SETH BERNSTEIN: We were at the end of that merger trail, basically. JPMorgan had been an independent entity until 1958 or ’59, when they merged with the Guaranty Trust Company, and that was Morgan Guaranty. The holding company was J.P. Morgan and Company, a wonderful bank. They valued people. They almost never went outside to recruit anybody. So it was a fantastic place to have a career, because whenever they’d go into a new business — whether it was bond underwriting, because they were prohibited under Glass-Steagall — they would essentially retrain people who were already there. So you got opportunities that weren’t necessarily available elsewhere.

00:04:23  BARRY RITHOLTZ: Promote from within. Not a bad strategy.

00:04:25  SETH BERNSTEIN: Promote from within, yeah. It worked for a long time, until it didn’t.

00:04:28  BARRY RITHOLTZ: And Glass-Steagall went away in late ’99, something like that.

00:04:32  SETH BERNSTEIN: Glass-Steagall effectively went — JPMorgan was really the first. They granted powers. JPMorgan got equity powers in 1991 or ’92, and I was moved to equity capital markets, a new group. I went there and then ended up running high yield. And then I was responsible for debt capital markets, loan syndications. And then at the time of the merger, I was in media and telecom, because that’s what you do with people who get bored of doing bond underwriting. You make them bankers, whether they’re good or not.

00:05:09  BARRY RITHOLTZ: You did more than just bond underwriting. You eventually became the global head of fixed income and currency.

00:05:13  SETH BERNSTEIN: So after the merger with Chase, I was kind of thinking about what I wanted to do. JPMorgan Chase thought it was a good idea to keep me around, so they gave me an incentive to stick around. I figured that would be a great opportunity to look around for a year and figure it out. If you’ll recall, markets began to taper off at the beginning of 2000, with the whole fear and the internet, the whole issue around building dark fiber. So the high yield market was going to hell in a handbasket. And so I decided maybe it would be a good idea to move. And one of my friends said, why don’t you come over to investment management and private banking? You’d be a CFO, figure out what to do. And then he said, you should run fixed income. And I looked at him — I’d been in fixed income for most of my career — and I said, but I’ve never managed anyone’s money. And he said, don’t worry, they don’t either. So come on board. And so that’s what I did.

00:06:14  BARRY RITHOLTZ: That’s unbelievable. So you were global head of fixed income and currency for 10 years, but then CFO of investment management and private banking?

00:06:24  SETH BERNSTEIN: That was before that.

00:06:24  BARRY RITHOLTZ: That was prior. So I’m working backwards. Right. So was fixed income and currency the final spot, or was it global head of managed solutions?

00:06:33  SETH BERNSTEIN: Global head of managed solutions. I ultimately was asked to go over and run the multi-asset businesses of both investment management — JPMorgan Asset Management — and the portfolios for the private bank of JPMorgan, which was hard to do, because one was a distributor, one was a manufacturer, and we ultimately split it up because we had to. And I then ran all the discretionary money for the private bank and Chase Wealth Management.

00:07:01  BARRY RITHOLTZ: All right. So from there, 32 years at essentially many, many different jobs, but ultimately in the same organization. You decide, all right, I’ve been doing this for three-plus decades, let’s look around and see what’s out there. What led you to take the top job at AllianceBernstein? And that was 2017, correct?

00:07:26  SETH BERNSTEIN: Well, they asked.

00:07:29  BARRY RITHOLTZ: How did they find you? Obviously, when you take on a position like that, they’re looking at a variety of different applicants. How did they find you?

00:07:41  SETH BERNSTEIN: They found me through a person who worked at AXA. AXA was the ultimate owner, the majority owner, of AllianceBernstein, and it was the owner of Equitable. AllianceBernstein was part of Equitable prior to AXA’s purchasing Equitable in 1990-ish. If you’ll recall, back then, that was right after Drexel collapsed, high yield collapsed, real estate collapsed. Equitable got caught up in that. And so Equitable was acquired by AXA, the French insurer, and they made a lot of money with it. They had bought it at a pretty knockdown price. And by 2017, AXA had decided to go in a different direction. They wanted to get out of the life insurance business. And so they decided that they needed to sell Equitable, and a way to facilitate that sale was to bring AllianceBernstein and Equitable back together. And so they were looking for a new head of AllianceBernstein to do that. And a person I knew from my time at JPMorgan was at AXA, and she introduced me to a number of the senior people there. And the rest is sort of history.

00:08:55  BARRY RITHOLTZ: So you’ve been CEO since 2017. At the time you join, AllianceBernstein has $500 billion. This is significantly higher, coming up on a trillion here. But when you were joining, you’re fighting some pretty substantial headwinds. There was a big investor shift going on, really since the financial crisis, from active to passive. Fee compression was everywhere. Institutional sales trading — I remember when that was 20, 25 cents a share. It went to pennies, and then fractions of a penny. What did you find when you joined the company? Anything surprising? Was it what you were expecting?

00:09:37  SETH BERNSTEIN: No, I don’t think you have any idea.

00:09:39  BARRY RITHOLTZ: Oh, really?

00:09:40  SETH BERNSTEIN: When you go from one company after nearly 33 years into another company — I knew a lot of people. I had been a private wealth client, believe it or not, of Bernstein for, at that time, 15, 16 years. I competed against them in fixed income. I knew a lot of people who worked there, but I had no idea what was going on. What I found was a company that had had a very tough financial crisis — their own investment performance in value and in growth. If you’ll recall, AllianceBernstein is a merger of a growth manager, Alliance, with a value manager in Bernstein. And the stock had soared, and AUM of the combined entity had reached, intra-quarter, almost $900 billion. By 2012, they were $380 billion.

00:10:31  BARRY RITHOLTZ: Wow.

00:10:32  SETH BERNSTEIN: And what was 70% equities, roughly, in 2006 was 30% equities in 2012.

00:10:36  BARRY RITHOLTZ: So bonds kind of held their own, and equities collapsed.

00:10:39  SETH BERNSTEIN: Bond performance was pretty good, but equity performance collapsed. We faced a lot of redemptions. My predecessor did a very good job restructuring it — a guy they had recruited out of Goldman — and he had brought in some new teams, and the firm began to develop some really interesting investment performance in equities, which allowed us to buck the trend and have net flows in active equities, which was an important growth. He also started the firm’s evolution into private credit, which I’ve taken a lot further. And the firm was listing but doing better from a performance perspective, not gaining much assets, and then really began to take off.

00:11:20  BARRY RITHOLTZ: What do you learn after 32 years at an institution that eventually becomes JPMorgan Chase about how great financial institutions are built? What was your takeaway that you brought to AB?

00:11:35  SETH BERNSTEIN: What I think I brought to AB was a different perspective, more global than they had. They were very U.S.-centric, although they had a great Asian business. I think I brought an appreciation of how investment processes worked, and an understanding that you can have the smartest people in the world with the most impressive process deliver appalling returns. It’s serendipitous why it works when it does work. So be careful mucking around in it. I think I brought an understanding that the way they had rebuilt AllianceBernstein was to strip resources from everything but the investment teams, because they had nothing to sell. They did a very good job at it. And I began to focus on distribution, whether it’s in private wealth and institutional, and most importantly in retail. And we decided to go full focus on the insurance business, because we saw that as a really important source of growth, both for our private credit business but also our fixed income business.

00:12:38  BARRY RITHOLTZ: What do you think big institutions get wrong? It sounds like post-GFC, AllianceBernstein, before your predecessor really took the reins, kind of was stumbling. It’s a little bit of hindsight that we know all the things that were going wrong with large active managers, but generally speaking, what is it about big institutions that they sometimes just don’t see these things coming, and stumble into the dark on these issues that clearly you identified as problematic?

00:13:16  SETH BERNSTEIN: Look, I think when the good Lord created business models, asset management was really blessed, right? You have no need for capital, or de minimis need for capital, working capital in the business. Your whole revenue stream is structured on ad valorem pricing. So even when you destroy value and markets go up, you make more money. Kind of a wonderful thing.

00:13:41  BARRY RITHOLTZ: Right? A 10% tailwind never hurts.

00:13:43  SETH BERNSTEIN: Never hurts. And we’ve certainly benefited, as has the industry as a whole, from that consequence. Thirdly, you get to work with some of the most interesting, if weirdest, people in the world.

00:13:55  BARRY RITHOLTZ: Absolutely true.

00:13:56  SETH BERNSTEIN: And frankly, particularly when you have an RIA and you have to be focused on wealth management, you better become a really good fiduciary. Because if you’re not putting your clients’ interests first, you’re going to lose them, because all you have is their confidence in you. Because your business, Barry, is a word-of-mouth business. People don’t come to you — I suspect not — because they’ve heard you on your show. They come to you because you have clients who say, this guy protected us.

00:14:23  BARRY RITHOLTZ: Yeah. There’s an aspect of being a fiduciary that seems so obvious today, but 15 years ago, the fiduciaries were a small minority. And I’ve been saying this for 30 years, and it’s taken me being wrong for decades before the industry caught up.

00:14:43  SETH BERNSTEIN: I’m not sure the industry is there yet.

00:14:45  BARRY RITHOLTZ: You look at the big brokerage firms — at the very least, they’ve all become hybrid RIAs.

00:14:50  SETH BERNSTEIN: That’s fair.

00:14:51  BARRY RITHOLTZ: And the dominant fee structure is no longer transactional commission. It’s pretty much fee-based. But when I discovered this in the 1990s, I thought, oh, this has to change right away. I don’t see how this — and it took literally 25 years before the industry, and the financial crisis certainly helped.

00:15:12  SETH BERNSTEIN: Well, but the industry hasn’t done itself any favors about it either. I mean, while I don’t particularly care for abusive and overly ruled legislation, the changes that they were trying to make with regard to forcing a higher fiduciary orientation was not a bad idea and concept.

00:15:36  BARRY RITHOLTZ: No, it was a great idea.

00:15:37  SETH BERNSTEIN: But the industry fought it pretty much.

00:15:38  BARRY RITHOLTZ: Well, because it meant they couldn’t spin these accounts around.

00:15:41  SETH BERNSTEIN: That’s right.

00:15:42  BARRY RITHOLTZ: And generate much higher fees. I mean, look, either it’s a fiduciary standard or it’s not.

00:15:50  SETH BERNSTEIN: It is not black and white.

00:15:51  BARRY RITHOLTZ: Right? You could play with suitability. You know, I used to say, what does suitable mean? Don’t sell IPOs to grandma. That’s suitability. But that isn’t the same as being legally obligated to put the client’s interest first. And the crazy thing is — and I don’t want to go on a rant on this here, because this is about you, not me — but shouldn’t your relationship with the person handling your finances be more like your doctor, lawyer, accountant, and less like the guy selling you a used Honda or BMW? That just doesn’t make any sense to me.

00:16:28  SETH BERNSTEIN: You see, to me, that’s the key issue that I think the industry’s gotten wrong, because I would dismiss the accountant and the attorney. There is no one you put more trust in than your healthcare advisor. After that, who’s the next?

00:16:42  BARRY RITHOLTZ: You would think it would be the person handling your money.

00:16:45  SETH BERNSTEIN: It’s your future. It’s your kids’ education, right? It’s your charitable intent. Your —

00:16:49  BARRY RITHOLTZ: Retirement.

00:16:50  SETH BERNSTEIN: It’s your retirement. Yeah. I think it’s really important, and I think we ignore that to our detriment.

00:16:56  BARRY RITHOLTZ: Coming up, we continue our conversation with Seth Bernstein, discussing the turnaround at AllianceBernstein since he’s become CEO. I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio.

00:17:12  BARRY RITHOLTZ: I’m Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Seth Bernstein. He is the CEO of AllianceBernstein, a firm which is managing over $905 billion and is majority owned by Equitable Holdings. About 31% is publicly traded. Is that approximately right?

00:17:34  SETH BERNSTEIN: Approximately right.

00:17:35  BARRY RITHOLTZ: So let’s talk a little bit about what was going on when you took over, and just how this turnaround came to pass. Persistent outflows, an active management model. A lot of the research department — like so many other research departments — were having difficulty justifying a lot of the expenses. What was the immediate short-term plan? What were your first few months on the job?

00:18:02  SETH BERNSTEIN: Yeah, so let’s talk about it. When you run into trouble before the markets turn, it is a silver lining and a blessing. And the firm had begun to take actions and was very much focused on costs. And by the time I arrived, the firm was looking at the merits of moving its headquarters out of New York, because as the industry commoditized, as active sales were declining broadly, the firm’s leases were coming up, and they really had a soul-searching discussion of, can we afford to continue in New York, or do we have to diversify our bets? By the time I had arrived, no decisions had been made. They briefed me on what was going on. And it seemed pretty clear to me that there was a compelling case to reduce our footprint here in New York and go find a place where we could find really talented people who we wouldn’t have otherwise seen, because they either couldn’t afford to live in New York, or, for example, people who were really tech savvy — were we going to be high enough on the food chain that they’d look for us to hire them here in New York, when you had Google at the time searching for everybody?

00:19:09  BARRY RITHOLTZ: Right. North and south, hoovering everyone up and paying great salaries.

00:19:12  SETH BERNSTEIN: Exactly right. We do pretty well finding investors and keeping them. We know how to manage them. They have very fruitful careers. But outside of that, it’s a more challenging career development issue. And so we looked around. We looked at a number of cities. Our firm is overstocked with former consultants, and so we overanalyzed everything, and we came down to five cities, one of which was Nashville. And we announced later in 2017 that we were going to relocate to Tennessee. And we are now eight years into it.

00:19:48  BARRY RITHOLTZ: A thousand people moved down there, right?

00:19:50  SETH BERNSTEIN: Ultimately, we have 1,100-plus jobs there.

00:19:54  BARRY RITHOLTZ: And so let me guess the other cities you were looking at. Okay?

00:19:57  SETH BERNSTEIN: Are you ready? So it was 15 originally, but I’m only expecting the five.

00:20:01  BARRY RITHOLTZ: I’m going to give you three off the top of my head. Charlotte.

00:20:05  SETH BERNSTEIN: That was one of the five.

00:20:06  BARRY RITHOLTZ: Because there’s so many big banks there. There’s a lot of talent. Chicago?

00:20:09  SETH BERNSTEIN: No.

00:20:10  BARRY RITHOLTZ: Really? A lot of finance talent. Half the price of New York. Tampa?

00:20:15  SETH BERNSTEIN: Nope.

00:20:15  BARRY RITHOLTZ: Really? Okay.

00:20:17  SETH BERNSTEIN: You’re not doing so good.

00:20:18  BARRY RITHOLTZ: All right. I’m one for three. Give me some.

00:20:21  SETH BERNSTEIN: Dallas.

00:20:22  BARRY RITHOLTZ: Okay.

00:20:22  SETH BERNSTEIN: Austin, where we already have a great operation.

00:20:24  BARRY RITHOLTZ: Well, Austin was actually number five in my head, but it didn’t come out. DFA is there. There’s a few other people there.

00:20:29  SETH BERNSTEIN: Schwab’s there.

00:20:31  BARRY RITHOLTZ: They’re still a big presence in San Francisco.

00:20:34  SETH BERNSTEIN: Yeah, but they have a big operation there. And Denver.

00:20:37  BARRY RITHOLTZ: Denver. Oh, that’s really interesting. So the obvious question: why Nashville?

00:20:43  SETH BERNSTEIN: We wanted to be a big fish in a small pond, which we couldn’t have been in Charlotte. I mean, Charlotte’s a very compelling place.

00:20:50  BARRY RITHOLTZ: Or Dallas.

00:20:51  SETH BERNSTEIN: Or definitely not Dallas. Although, what a dynamic economy.

00:20:55  BARRY RITHOLTZ: Tremendous economy. A ton of hedge funds, a ton of finance.

00:20:58  SETH BERNSTEIN: A lot of talent there. A lot of people moving everywhere. Good demographics. Austin.

00:21:03  BARRY RITHOLTZ: And by the way, Dallas is a very livable city.

00:21:06  SETH BERNSTEIN: It is. I agree.

00:21:07  BARRY RITHOLTZ: Houston is just a humid swamp, but it’s located near all of the oil areas.

00:21:16  SETH BERNSTEIN: But a great art scene and really good food.

00:21:18  BARRY RITHOLTZ: Yes. Fantastic food in Houston. Absolutely. Texas is filled with all these really fun things. Dallas is Dallas. I haven’t been to Dallas in a few years. I’m going to be there in the fall. It’s just a delightful city.

00:21:32  SETH BERNSTEIN: Denver. Austin, sorry, I mentioned Austin. But Austin’s tough to get to for our people who are in Asia and in Europe.

00:21:41  BARRY RITHOLTZ: There’s that “nerd bird,” they used to call it, back and forth from Silicon Valley to Austin, decades ago in the nineties, because even then the tech companies were moving back office to cheaper Texas. Cheaper land, cheaper everything.

00:21:56  SETH BERNSTEIN: But it’s no longer back office.

00:21:58  BARRY RITHOLTZ: Well, that’s been the big change. Although post-pandemic, a lot of Wall Street moved to Miami, and then a bunch of them kind of boomeranged back. It’s kind of interesting. We are wildly off topic. Let me bring this back to your first six months at AllianceBernstein.

00:22:18  SETH BERNSTEIN: So we decide to move to Nashville. That was worth roughly $85 million a year to us, recurring.

00:22:24  BARRY RITHOLTZ: Really? Oh my goodness. That’s a massive savings.

00:22:28  SETH BERNSTEIN: It was a huge savings. Part of it was real estate, part of it was people, and it’s worked real well for us.

00:22:35  BARRY RITHOLTZ: Wow. Almost a hundred million dollars a year.

00:22:37  SETH BERNSTEIN: And here’s just another part of it: we didn’t force any of our investors to move, because we’re price takers of that talent. I think now — and I may be wrong — I think we have nearly a hundred investors who have elected to move down there.

00:22:50  BARRY RITHOLTZ: When you say investors —

00:22:52  SETH BERNSTEIN: Money managers.

00:22:53  BARRY RITHOLTZ: — who picked up and left New York, or elsewhere, or wherever.

00:22:57  SETH BERNSTEIN: Correct.

00:22:58  BARRY RITHOLTZ: I mean, don’t get me wrong, Nashville is a spectacular, super fun town.

00:23:02  SETH BERNSTEIN: It’s a great town.

00:23:04  BARRY RITHOLTZ: Just not what you think of when you think of finance.

00:23:06  SETH BERNSTEIN: Well, you know, ironically, it was the financial center for the Upper South for many, many years.

00:23:12  BARRY RITHOLTZ: Oh, really? I had no idea. That’s really interesting. All right. So you have this strategic and financial savings by moving there. What were some of the challenges? What was, oh gee, we didn’t anticipate this happening?

00:23:30  SETH BERNSTEIN: You mean in moving? Look, I think the most notable challenge is it’s a domestically focused city from a private sector employment perspective. It’s the healthcare services capital of the U.S. But guess what? Hard to find international tax accountants locally. People with those kinds of exposures, and people who had more traditional Wall Street-like training, whether from an operations or technology side. What was a delightful surprise is we got over the wall lots of resumes from people in Atlanta, Chicago, New York, Boston, and the West Coast, saying, hey, you know, I’m from there, or my spouse is from there, or I really like the lifestyle, I was there for a bachelorette party. So, but it worked. And so it’s been pretty good for us.

00:24:21  BARRY RITHOLTZ: As for the international tax accountants, do they have to physically be located in Nashville? If we learned anything during the pandemic, hey, if you have a computer and an internet connection, you can pretty much be anywhere.

00:24:34  SETH BERNSTEIN: You know, ultimately I’m a big believer in people working together collaboratively within the office. We recognize we’ve got to be flexible, and we’re never going back to five days a week. But we want people as close as we can around. But yes, we have people all over the country. We do, all over the world. We have functions which operate in multiple locations simultaneously. So of course we can do it, but we wanted critical mass there.

00:25:01  BARRY RITHOLTZ: So let’s stay with that idea of corporate culture — having everybody in the office together when you can. When you arrived at AllianceBernstein, what really struck you about the culture that needed to be preserved? What was like, hey, this is really something?

00:25:17  SETH BERNSTEIN: Deep fiduciary culture. Really, really putting clients first, whether it’s in our private wealth business or our investment teams. I think both Alliance and Bernstein did that beautifully, and I think that continues to thrive. I hope that’s one of the most important things for me about the institution. We had, as you pointed out, a very well regarded sell-side research business, which I decided to see if we could reduce our exposure to, for exactly the reasons you said. It is an accident of history why a buy-side firm had a sell-side research business to start with, but almost everyone cross-subsidizes those businesses — so their equity capital markets business or prime brokerage business. We didn’t have any of those cross-subsidies to provide to them. And so we entered into a joint venture with SocGen, Société Générale, which has proven to be pretty successful, and the quality of the research remains very strong, and they have a much stronger partner with deep markets capabilities that they are really, I think, doing a good job commercializing.

00:26:29  BARRY RITHOLTZ: And all those other banking relationships that make sense to have a research department with. Eventually, do they take over the research group, or is it always going to be a joint venture?

00:26:39  SETH BERNSTEIN: No. Ultimately, it’ll transition to them. And that was always the intention. We were quite clear about it. They were very concerned about the culture and not damaging it. It’s a large French institution, and these were a bunch of Americans and Brits. And so we needed to make sure we took stuff very, very mindfully, step by step. We’re still midway through that period. We have five years from the anniversary. We have an arrangement which we talk about from time to time. But that’s the plan.

00:27:12  BARRY RITHOLTZ: And in 2022, AB buys CarVal, which is a specialist in private market credit and debt issuance. The combined private market platform between Bernstein and CarVal is $91 — almost a hundred billion dollars.

00:27:28  SETH BERNSTEIN: That’s right. It was roughly $35 billion before we bought them, and they were another $16 billion, so call it $50 billion. So we’re nearly double what we were when we acquired them.

00:27:40  BARRY RITHOLTZ: So I’m really curious: how does what’s essentially an equity and fixed income shop like AllianceBernstein go about kicking the tires of an alternatives business? There has to be a ton of challenges there. How do you conceptualize those risks?

00:27:57  SETH BERNSTEIN: Look, I grew up lending. I ran the leveraged finance business at JPMorgan. It’s a business I knew. I’m certainly no current expert on the intricacies of it today. But prior to me arriving, AB had built quite a successful private credit business. When Lehman collapsed, we took a team out of Lehman to build a middle market lending business. They’re with us today, based in Austin, and have been remarkably successful. A private real estate debt business. And we had a natural client base. We have, in addition to Equitable — and now Corebridge, when that merger occurs — we have 60 insurance companies as clients who we manage money for.

00:28:42  BARRY RITHOLTZ: So you guys are uniquely situated to sell into the insurance market. Obviously, having a majority owner that’s an insurer provides one aspect. But given that history, what has it been like looking into that market, which I don’t hear a lot of other large shops being aggressive sellers into, the world of insurance?

00:29:05  SETH BERNSTEIN: Sellers or buyers into the world of insurance?

00:29:07  BARRY RITHOLTZ: Either or both. You are selling your product to them and taking their assets in, as well as the parent company merger — we’ll talk about that merger later. But you’re on — I don’t want to say both sides of the trade — but you’re selling into that marketplace and have a deep understanding of the insurance business.

00:29:29  SETH BERNSTEIN: We’ve been managing insurance money forever. I mean, Alliance was started by a life insurer, effectively. And the skills are very different. The client service model is totally different — highly customized, very relationship dependent. The expertise around subject matters, whether it’s regulatory accounting, whether it’s asset-liability matching, really are critical parts of that sale. We do that very well, and we continue to invest in it. And frankly, it’s the largest pool of institutional capital there is in fixed income. And it’s growing. It’s growing at a pretty rapid rate.

00:30:12  BARRY RITHOLTZ: Yeah. You guys and this other kid named Warren Buffett at Berkshire figured out, hey, there’s a tremendous amount of stable assets that —

00:30:21  SETH BERNSTEIN: What a great funding source.

00:30:23  BARRY RITHOLTZ: Right? I mean, how is it that nobody else really seems to —

00:30:26  SETH BERNSTEIN: Oh, other people have thought about that. Marc Rowan thought about it, and I think he’s done pretty well.

00:30:31  BARRY RITHOLTZ: Apollo.

00:30:32  SETH BERNSTEIN: Apollo’s done very well. KKR has figured that out. Guggenheim figured that out. A lot of firms have figured it out.

00:30:38  BARRY RITHOLTZ: Really interesting.

00:30:40  SETH BERNSTEIN: And Prudential being a good example.

00:30:41  BARRY RITHOLTZ: Well, right, but they started on the insurance side, not on the asset management side. But very fair examples. I have to ask about the ETF business. It was effectively nonexistent when you joined. Is that a fair statement?

00:31:00  SETH BERNSTEIN: That’s correct.

00:31:01  BARRY RITHOLTZ: 31 strategies, $21 billion, pretty rapidly.

00:31:03  SETH BERNSTEIN: All active.

00:31:04  BARRY RITHOLTZ: Actively managed, almost all. Yes. Very, very little in terms of just passive indexing.

00:31:08  SETH BERNSTEIN: Very little. And more importantly, almost all of them are new strategies. So they aren’t cannibalizing existing strategies. It’s not a new wrapper for the vast majority of that.

00:31:18  BARRY RITHOLTZ: So what led you to the ETF business, and how did this ramp up?

00:31:22  SETH BERNSTEIN: I hired an incredibly talented guy named Onur Erzan from McKinsey, who is now president of AllianceBernstein. And he absolutely banged the table, pounded the table, that we’ve got to ramp up our active ETF business. And I think he was right, and we backed it. And it’s been a big story for us here. It’s a growing story for us in Asia, where we really punch above our weight, and we’re excited to see what we can do in Europe.

00:31:49  BARRY RITHOLTZ: Where do you think the ETF business can go for AB? How big can this get?

00:31:56  SETH BERNSTEIN: I’m pretty confident, absent some weird regulatory or legal reason — for example, 401(k) plans have a difficult time owning ETFs; the Department of Labor can change that — but we’re not going to launch another mutual fund in the U.S., really. I think it’ll all be ETFs, unless the asset class doesn’t suit it for the liquidity constituency of it. But I think it will be the vehicle of choice, along with separately managed accounts. I think those will be the two wrappers we really focus on. For an individual who’s a client of yours, if you can deliver most of that in SMA form, he or she is paying a lot less tax, because you can tax-manage it much more effectively. You can avoid wash sales. You can have a less overly diversified portfolio, because remember, you have lots of unintended bets when you have a multi-manager portfolio.

00:32:51  BARRY RITHOLTZ: Right, right. Really interesting. Coming up, we continue our conversation with Seth Bernstein, CEO of AllianceBernstein, discussing the current environment for asset management. I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio.

00:33:08  BARRY RITHOLTZ: I’m Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My extra special guest is Seth Bernstein. He is the CEO of AllianceBernstein and Head of Asset Management at Equitable Holdings. AllianceBernstein manages over $900 billion in client assets. I have to ask you a funny question. Many years ago, I worked with a guy who, by dumb coincidence, had the same last name as one of the names on the door of the firm.

00:33:40  SETH BERNSTEIN: Alliance.

00:33:40  BARRY RITHOLTZ: No, no, no. Totally different company, but similar concept to you. And whenever a prospective client would ask, he had this terribly amusing non-answer. Something along the lines of, look, I’m trying to create my own reputation and brand separate from the family wealth, and I just wish you would treat me as an independent — never saying, no, I’m completely unrelated to the family. I called it the non-denial denial. I’m curious, your last name is Bernstein, of AllianceBernstein. Does anyone ever say to you, hey, are you the —

00:34:22  SETH BERNSTEIN: All the time.

00:34:23  BARRY RITHOLTZ: All the time. All the time. Obviously you haven’t been there since —

00:34:27  SETH BERNSTEIN: The more insulting question is, are you the founder? And I said, no, I’d be over a hundred years old.

00:34:35  BARRY RITHOLTZ: Right. When was it founded?

00:34:38  SETH BERNSTEIN: 1967.

00:34:41  BARRY RITHOLTZ: Okay. So when you were done playing with blocks, you didn’t have to go into the office that morning?

00:34:48  SETH BERNSTEIN: No, not that day.

00:34:49  BARRY RITHOLTZ: Not that day. But this legitimately comes up —

00:34:53  SETH BERNSTEIN: Regularly, particularly in the private wealth business. But where it’s really important to make it clear is in Asia, where —

00:35:00  BARRY RITHOLTZ: Because they just assume.

00:35:01  SETH BERNSTEIN: Everyone assumes, because most of their businesses are family oriented. But just so you know, in the final moments of whether I was going to get this job or not, I did offer to change my first name to Alliance to get it.

00:35:14  BARRY RITHOLTZ: That’s really amazing. And the fascinating thing about that is, if there’s any industry that’s a meritocracy, it feels like Wall Street has evolved. You live and die on — forget annual performance — what your numbers were last quarter, last month, last week. It really is performance driven and not necessarily your last name. I had to ask if that came up. That’s really fascinating. So let’s talk a little bit about the current environment. There is a merger that was approved by shareholders of Equitable and Corebridge. I know the deal hasn’t closed, and so you probably can’t really say a whole lot about it, but this is going to create about a hundred billion dollars of Corebridge assets that are going to ultimately end up — I assume — moving over to AB. Does anything change for you guys with the upcoming merger of Equitable and Corebridge?

00:36:19  SETH BERNSTEIN: Other than the assets, I’m not aware of anything changing. And they very much value the identity that AB has. And, you know, we are thrilled by the merger and the opportunities that will bring, but no changes anticipated.

00:36:39  BARRY RITHOLTZ: So let’s talk a little bit about some of the assets that you guys have been growing. Private credit, at least up until this year, has been a house on fire. What do you think about the future of private credit? What’s going on there?

00:36:56  SETH BERNSTEIN: Banks are constrained in their ability to continue to service their clients through loans. They’ve been that way structurally, certainly since the financial crisis, and even before that it was hard to hold these assets on balance sheet. JPMorgan spent an enormous amount of time and money trying to securitize their loan book. In fact, that’s where credit derivatives started. And I worked in the groups that helped formulate that, although I certainly was in no way the father of the engineering around that. But it was critically important to reduce that exposure on most bank balance sheets. I believe that trend continues. Banks are levered players. They’re funded short. They’re not natural holders of long-lived, particularly fixed-rate, assets. Insurers are a much better home for that. And frankly, so are funds, because funds don’t offer true liquidity options for you. There’s no run on a fund. Now, what we’ve seen recently, and one of the reasons private credit has been in the news, is vehicles structured for wealthier clients did have some very limited liquidity options for them. But ultimately, there is no maturity transformation in credit. You got what you got. And frankly, I think there shouldn’t be any liquidity other than the payment of interest and repayment of the debt itself.

00:38:26  BARRY RITHOLTZ: I’m glad you say that, because I frequently have this conversation with peers elsewhere. Which part of “seven-year lockup” did you find confusing? The illiquidity premium exists because it’s illiquid. If you want liquidity, well, here’s a hundred trillion dollars in the public fixed income markets. Have at it. Am I being too harsh, or is that a fair statement?

00:38:51  SETH BERNSTEIN: Look, I think people want to get the stuff sold, and so they try to do what they can. But frankly, I think giving any expectation — and frankly, I think the documents were pretty clear — that liquidity isn’t there. But I think better that we go through this now, before there’s any significant credit deterioration. I mean, clearly there’s some deterioration out there.

00:39:13  BARRY RITHOLTZ: It’s relatively — for anyone who lived through the GFC — pretty modest. This is —

00:39:18  SETH BERNSTEIN: It’s nothing. So the truth of the matter is, while there will be loans that go bad, I think most of these funds will be pretty fine at the end of the day. And ultimately, there’s a role for it to play. But it’s really — our focus is much more institutionally focused rather than —

00:39:34  BARRY RITHOLTZ: Than what we’ve seen in some of the areas in it. And just so people understand, there’s a — depending on the funds — two, three, four percent default expectation built into these models. It’s not like, oh my God, something defaulted. That’s just what happens in the normal cost.

00:39:53  SETH BERNSTEIN: That’s the nature of lending money. Yeah, and that’s absolutely true. Now, we have private credit in our private wealth businesses as well, and I think properly structured, it has a role for you, particularly if you have a tax-advantaged location to put it.

00:40:08  BARRY RITHOLTZ: So let’s talk a little bit about private credit. I think the big issue from earlier this year — and hold aside the specific companies that kind of ran into trouble — but when you look at what’s going on, there’s a wide dispersion of underwriting quality. There’s some variance in how often and how precisely these marks happen in these non-traded things. And then, again, we come back to the redemptions in non-traded vehicles, which always kind of shock me. What does this industry need to do to get past the sort of difficult first half of the year we saw in 2026?

00:40:50  SETH BERNSTEIN: Post numbers which show that maybe there’s a deterioration, but it’s not meaningful yet. Educate clients on what’s going on by providing them more transparency — a sense of clarifying, you know, how many names are on your watch list? How many have gone non-accrual?

00:41:11  BARRY RITHOLTZ: There’s no obligation to do that currently.

00:41:14  SETH BERNSTEIN: There is, and they do it for accounting and reporting reasons. But ultimately, regular, periodic updating of your client probably makes them more comfortable with what’s going on. You should be over-communicating during periods like this.

00:41:27  BARRY RITHOLTZ: That’s really — during periods like this, or always?

00:41:31  SETH BERNSTEIN: Well, I think always, because ultimately they’re trusting that you’re giving them a balanced view of what’s going on.

00:41:37  BARRY RITHOLTZ: And to be fair, the headlines are not about the whole industry. It’s about a small handful of companies that have run into modest issues. Again, we’re not in —

00:41:52  SETH BERNSTEIN: And there’s always been fraud. I mean, that’s what we’ve seen come out from time to time in —

00:41:55  BARRY RITHOLTZ: A couple of places.

00:41:56  SETH BERNSTEIN: Sure, in a couple of places. But the truth of the matter is, there’s been an enormous amount of money that’s focused on this segment. And so I think you’re absolutely right. Structuring, terms and pricing got out of whack. But frankly, it’s a much better time to be investing today, post that event.

00:42:14  BARRY RITHOLTZ: So let’s talk a little bit about where this space is going. For most of my career, private credit has been pretty much all institutional. Over the past few years, we’ve seen a big take-up from the wealth management side — RIAs, et cetera. And then a lot of conversations about this being available for retirement accounts or 401(k)s. Tell us your thoughts. What do you think happens with private credit, and how do we do this the right way so we don’t run into these problems?

00:42:45  SETH BERNSTEIN: I think actually target date funds, 401(k)s generally, might be a perfectly appropriate place for it. Highly predictable needs. You have professional management making those decisions, usually separate from the people managing the money themselves. The sponsors of those 401(k) plans are pretty sophisticated investors in their own right. Private credit, particularly for individuals who need the income that those portfolios will generate, might have a very welcome spot in it. And in fact, we are, we think, leaders in working with other private asset managers in developing vehicles to utilize side by side with your target date funds in order to build highly diversified private credit, private equity, private real estate exposures for the beneficiaries of those plans. To me, that’s an institutional purchase, because there’s someone intermediating that decision.

00:43:57  BARRY RITHOLTZ: So let’s talk about that group. It’s AllianceBernstein, Brookfield, and Carlyle working together. How did this come together, and where do you think this goes?

00:44:08  SETH BERNSTEIN: Well, I think it came together as we were talking to other firms about what we thought. We’ve been a pioneer in the 401(k) business, in building particularly custom glide paths and target dates for big, sophisticated plan sponsors — state plans, corporate plans. And there was clearly a desire to get a higher return built in over time into these portfolios, given the aging population, the need for diversification and different sources of return. And so we went and polled a number of different firms, and we ended up finding we had really compatible philosophies and capabilities with Carlyle. We engaged with a number of firms in trying to understand who would be a natural complement to us. And from a private or real asset side, we thought Brookfield would be a very strong partner. And from a private equity side, we thought Carlyle brought a lot to the table. So we ultimately formed it. And it’s very early days. I think the industry has been too enthusiastic about how quickly all of this will be adopted. Plan sponsors tend to be a pretty conservative group of people at the end of the day, and it’s going to take years for this really to develop. But 10 years from now, will that be part of most of the large plans? I suspect it will be.

00:45:35  BARRY RITHOLTZ: How do you address some of the criticism? Anytime we see a new 401(k) plan come along, or a response come along, I always am raising my eyebrows about how much the industry — and to some degree you can blame BlackRock and Vanguard for this — has driven fees down generally, but even more so in 401(k)s. In the old days, I would look over a 401(k) and be aghast at, why are you paying 2% for an S&P 500 fund? This doesn’t make any sense. Now I look across some of the 401(k)s that I see, and they’re very inexpensive. Can privates find their way into 401(k)s at a competitive price point?

00:46:20  SETH BERNSTEIN: Yes. I think for two reasons. One, these are institutional investors in their own right, so they’re going to negotiate hard to get lower fees. Insurers don’t pay huge fees for private credit, because the cost of funds matters enormously to them. Secondly, it’s a very small portion of the total portfolio, and frankly, the cost of administering the overall plan. So between their competitive power as buyers, institutional buyers, and the small component of the total target date portfolio that they’re going to constitute, it’s a pretty small part of the fee burden that a client is going to be carrying. And frankly, it should be fairly easy to outperform net of fees.

00:47:08  BARRY RITHOLTZ: And that’s all anyone really cares about.

00:47:10  SETH BERNSTEIN: And that’s really all that people care about.

00:47:11  BARRY RITHOLTZ: Right? Especially — we’ve been in a low rate environment for so long. The expectation is maybe it’s higher for longer, but not 10 years. So we’ll be back to a lower interest rate — not zero, but lower — interest rate environment, and people want some yield. That’s really the driving thinking here.

00:47:29  SETH BERNSTEIN: I think that’s exactly what the thing is. Look, if you look at the supers in Australia, which are really interesting innovations — the superannuation funds in Australia have been intellectual leaders in how to think about retirement. And one of the really interesting things they do is they structure glide paths through retirement rather than to retirement. The last thing most people need at age 65 is to be predominantly in short-term fixed income and cash. You need to be invested.

00:48:02  BARRY RITHOLTZ: On the assumption you have another 20, 25 years to go.

00:48:05  SETH BERNSTEIN: Even 10 years. Yes. Most people don’t have enough money to retire, right? So a lot of people defer their ultimate retirement and get supplemental income elsewhere. So planning into retirement, I think, is a pretty prudent thing to do. Ultimately, if you’re able to tie that to purchasing annuities at a pretty low cost — so not purchasing them necessarily upfront, but maybe planning your target dates to end with a pool of liquidity to turn around and buy annuities at age 75, for example — you could really reduce the cost of that and give people income protection for a longer period in their life. I think there are really interesting things that are going to continue to evolve in the target date space.

00:48:47  BARRY RITHOLTZ: Really, really interesting. Since you mentioned 65, I have to ask: you’re coming up on a decade as CEO. Do you think about succession planning? Have you thought about who follows you when you decide to take your retirement?

00:49:07  SETH BERNSTEIN: You see, I think that’s one of my most basic obligations, and we spend a lot of time on succession planning, not just for me but for all the senior leadership of our firm. And yes, we have plans in place, and I don’t expect to be there —

00:49:27  BARRY RITHOLTZ: Forever.

00:49:28  SETH BERNSTEIN: Forever. Right. So, yes.

00:49:30  BARRY RITHOLTZ: So given that you’re there, in a few months, 10 years: what are you most proud of? What decisions did you make that you wish you could undo? And what of the long-term plan remains unfinished at AllianceBernstein?

00:49:47  SETH BERNSTEIN: Oh, good question. What should I have done that I didn’t do? I should have put my own people in quicker. Just as a learning to me: any new CEO, you need people you really trust can execute a transition and are bought into it. And change is a good thing. It’s not necessarily a bad thing. Secondly, I’m particularly proud of what we’ve done in our private credit space. I’m really proud of what we’ve done in the insurance space. I think those are winners. We have built a market-leading SMA platform for munis. We are growing really rapidly. We’ve automated the investment process. We give people choice, we give people information, and we give people client service that they don’t get at other firms. And it’s been growing like a weed for a while now. I’m very proud of what our fixed income team has done there. I think our private wealth business remains a gem. We have incredibly loyal clients, and I’d love to grow that business more rapidly than we have. We are growing at a good rate, but we grow organically. We haven’t grown inorganically, frankly, because valuations for RIAs are hard to justify. Also, we are very sensitive to the cultural implications of big mergers. They just don’t have a great track record of working, either in the wealth management space or the investment management space.

00:51:26  BARRY RITHOLTZ: So last question, before I get to my favorites, which I have to ask you as both the current CEO and former CFO: the AB stock price has been fairly stable. Your dividends are pretty beefy, something like nine or 10%. Is that something that is by design, or is it just the nature of — you guys throw off a lot of free cash flow?

00:51:52  SETH BERNSTEIN: The industry throws off an enormous amount of free cash flow, and in a mature business, you should probably be distributing it. In our case, it’s by design. We’re about the last publicly traded partnership.

00:52:05  BARRY RITHOLTZ: Which is an unusual structure in itself.

00:52:07  SETH BERNSTEIN: Very unusual. The only place people used to see them was really in MLPs and stuff, you know, in the energy sector in particular, and in real estate.

00:52:16  BARRY RITHOLTZ: And the dreaded K-1s.

00:52:17  SETH BERNSTEIN: And we issue K-1s, so that’s a hassle, which limits institutional interest in the stock. But that’s who we are. That’s what we have.

00:52:29  BARRY RITHOLTZ: I find that such a fascinating, quirky thing. And yet I guess it’s the institutional allergy to K-1s; otherwise, I would imagine there’d be broader ownership of a coupon like that. It’s essentially a high-yielding bond with an equity kicker.

00:52:52  SETH BERNSTEIN: That’s essentially it. It’s a convert.

00:52:54  BARRY RITHOLTZ: That’s what it looks like.

00:52:56  SETH BERNSTEIN: And I mean, the truth of the matter is that if I really believed — if the board really believed — the stock price would really pop, if our majority owner didn’t have a negative tax implication of doing it, I think you’re obliged to look at it. But the honest answer is, if you do it and you don’t get that pop, you’ve got a lot of people who are not so happy with you.

00:53:20  BARRY RITHOLTZ: Right. To say the very least. All right, I only have you for a few more minutes, so let’s jump to our favorite questions that we ask all of our guests. Starting with: who are your mentors who helped shape your career?

00:53:32  SETH BERNSTEIN: Oh, I had a number of mentors. I guess my most influential mentor was my mother. She was a very successful advertising executive, and she was no-nonsense, always. But when I go beyond that, at JPMorgan, the guy who ran equity capital markets and believed in me, a guy named Brian Watson, who ended up running the venture capital and private equity business of JPMorgan before the merger. He was a really instrumental mentor to me. I think the guy who runs Equitable, Mark Pearson, has been an unbelievable mentor and partner in running it, because the relationship between those two firms was rocky for a time. And I think we’ve run it as one larger business while maintaining the individuality of the individual business units. Those are three people that come to mind.

00:54:32  BARRY RITHOLTZ: Really, really interesting. Let’s talk about books. What are some of your favorites? What are you reading currently?

00:54:39  SETH BERNSTEIN: I am reading the new book on the Trump administration that came out, that Maggie Haberman wrote.

00:54:46  BARRY RITHOLTZ: She’s always a fun, fiery writer.

00:54:49  SETH BERNSTEIN: She sure is. And it brings it home, and it brings it live. During COVID, a bunch of friends and I got together and created a book club. And we never read fiction. And so for a while, while the book club was operating, we read a ton of fiction, which was —

00:55:09  BARRY RITHOLTZ: Give us a few names.

00:55:11  SETH BERNSTEIN: We read The Razor’s Edge. We read Kim by Rudyard Kipling. We read — God, I’m having a senior moment, which come more and more frequently, and only travel in one direction —

00:55:33  BARRY RITHOLTZ: As an older man.

00:55:34  SETH BERNSTEIN: It gets —

00:55:34  BARRY RITHOLTZ: Worse. As an older man, I can tell you it only — I’m a day older than you, and let me just share my experience: it only gets worse.

00:55:41  SETH BERNSTEIN: Right. One of the books we read, which I love, was James, which is kind of a retelling of the Huckleberry Finn story.

00:55:52  BARRY RITHOLTZ: Oh, really?

00:55:54  SETH BERNSTEIN: It’s a fantastic — James.

00:55:56  BARRY RITHOLTZ: I’m going to definitely put that on my list.

00:56:00  SETH BERNSTEIN: Tom Sawyer. Yeah.

00:56:01  BARRY RITHOLTZ: Yeah. Since you mentioned what you were doing during the pandemic, what about streaming? Are you watching or listening to anything?

00:56:09  SETH BERNSTEIN: No, my wife hates me because I don’t watch stuff with her.

00:56:12  BARRY RITHOLTZ: Oh, really?

00:56:13  SETH BERNSTEIN: I mean, we did. We watched a lot of things like Shrinking. I love it.

00:56:17  BARRY RITHOLTZ: We love Shrinking.

00:56:18  SETH BERNSTEIN: Yeah. I was a big Game of Thrones fan, stuff like that. But no, I don’t. I read a lot. So I’m not great at that.

00:56:26  BARRY RITHOLTZ: Final two questions. What sort of advice would you give to a recent college grad interested in a career in either investing, wealth management, fixed income trading, anything along those lines?

00:56:40  SETH BERNSTEIN: Sure. My advice to them is never act like you know the answer if you don’t, because people aren’t going to trust you because of your experience. So if you lose that trust early, it’s really hard to regain. Two —

00:56:54  BARRY RITHOLTZ: Wait — don’t fake it till you make it? Because that was —

00:56:57  SETH BERNSTEIN: I think you’re out of your mind.

00:56:59  BARRY RITHOLTZ: I heard that year after year after year, and always hated it.

00:57:03  SETH BERNSTEIN: The second thing I would say to you is the other side of that coin, which is: ask lots of questions. It’s okay. I mean, you can get totally irritating, and I’m going to throw you out of my office eventually, but I don’t expect you to know the answer.

00:57:18  BARRY RITHOLTZ: And our final question: what do you know about the world of investing today that might have been useful 30, 40 years ago, when you were first getting started?

00:57:29  SETH BERNSTEIN: People who think they can time the market, and do, and actually can prove out that they really do it well — you can count on one hand. Diversification: no one diversifies to get rich. You diversify to stay rich.

00:57:44  BARRY RITHOLTZ: And those are two very different skill sets, aren’t they?

00:57:47  SETH BERNSTEIN: Exactly.

00:57:48  BARRY RITHOLTZ: Really fascinating. Seth, thank you so much for being so generous with your time. This has been absolutely delightful. We have been speaking with Seth Bernstein. He is the CEO of AllianceBernstein and the Head of Asset Management at Equitable Holdings. If you enjoy this conversation, well, check out any of the 659 we’ve done over the past 12 years. You can find those at Bloomberg, iTunes, Spotify, YouTube, or wherever you find your favorite podcasts. I would be remiss if I didn’t thank the crack staff that helps put these conversations together each and every week. Sean Russo is my head of research. Anna Luke is my producer. And today is the last episode of Alexis Noriega, my video producer, who helped bring Masters in Business to the video world over the past year. I just want to say an extra special thank you to Alexis for everything she’s done for us. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.

 

~~~

 

 

 

The post Transcript: Seth Bernstein, Chief Executive Officer of AllianceBernstein appeared first on The Big Picture.

UK Mulls Military Support For Saudis Against Houthis After MbS Appeal

Amid ongoing Saudi humiliation as the Houthis have rapidly expanded their territory in Yemen, which involved a 36-hour period last week where the rebels took control of the country's entire Red Sea coast, Crown Prince Mohammed bin Salman (MbS) is desperately seeking military help from key allies in the West and regionally.

Already rejected by the Trump administration (other than some few dozen American advisors being brought into the kingdom to help guide a response), Britain is weighing whether to step up.

According to Bloomberg, the Saudi government has issued a formal request to Andy Burnham's government for operational support in repelling the Iran-aligned rebels, given their threat over the Bab el-Mandeb Strait, and amid the increased attacks inside the kingdom on airbases and Aramco oil sites.

Like the meager US response, Burnham has agreed to send British military advisors, Bloomberg notes, while contemplating potentially bigger action - which has yet to be decided.

The key problem remains that after drones struck the kingdom's East-West oil pipeline, which is expected to be down for major repairs for a month or more, Riyadh is looking to increase its amount of oil shipments to offset the losses. Reuters has indicated at least five or six weeks for the pipeline to come back online.

And now it is both the Iranians and Houthis threatening its exports, and not to mention Shia militias out of Iraq (the latter believed responsible for the drone attack on the pipeline). Oil has soared since last week's Houthi blitz against the Saudi-backed Yemeni government, allowing it to tighten its 'siege for siege' policy against Saudi Arabia.

Not only do the Saudis desperately want British help in Yemen, but MbS is flying to Cairo Tuesday, where he will likely also asked President Abdel Fattah el-Sisi for military support.

Reports also say he wants Turkish help, especially in light of the recently inked Mecca Defense Pact - which so far hasn't resulted in any kind of 'Article 5-style' response.

Saudi wants British help in Yemen, MbS is flying to Cairo today presumably to ask Sisi for the same, and perhaps hoping for Turkish support as well

Really shortlisting on experience here: it's a coalition of the previously routed https://t.co/sUkLz08WqH

— Gregg Carlstrom (@glcarlstrom) September 15, 2026

As for where things stand on the battlefield, and amid more overnight reports of Houthis ballistic missiles fired on Saudi Arabia, one pundit has offered a hilariously accurate assessment of Saudi Arabia's performance thus far. Bill Buppert of The Libertarian Institute writes:

I’m not sure there has been a more incompetent regional military power as the Saudis since Italy in WWII. They have the 8th largest military budget in the world. The Saudis pour billions into their military for the very best state-of-the-art equipment which makes the result even more comical.

Their whole army is designed for vibes and aura farming.

They’re the opposite of the Italians. Italy had terrible production, equipment and leadership, but actually fought bravely, whereas the Saudis are given all the equipment and advisors they could dream of and still fail.

Mind you, the current conflict is primarily between the Yemeni military and Houthi militants. Currently the Saudis only provide logistical support and airstrikes.

The whole first book of Dune revolves around underestimating the Fremen.

The commentator then concludes: "Money can’t buy competence" - after Washington and London have spent decades sinking billions into Saudi military readiness and base infrastructure.

Tyler Durden Tue, 09/15/2026 - 08:40

UK Mulls Military Support For Saudis Against Houthis After MbS Appeal

Amid ongoing Saudi humiliation as the Houthis have rapidly expanded their territory in Yemen, which involved a 36-hour period last week where the rebels took control of the country's entire Red Sea coast, Crown Prince Mohammed bin Salman (MbS) is desperately seeking military help from key allies in the West and regionally.

Already rejected by the Trump administration (other than some few dozen American advisors being brought into the kingdom to help guide a response), Britain is weighing whether to step up.

According to Bloomberg, the Saudi government has issued a formal request to Andy Burnham's government for operational support in repelling the Iran-aligned rebels, given their threat over the Bab el-Mandeb Strait, and amid the increased attacks inside the kingdom on airbases and Aramco oil sites.

Like the meager US response, Burnham has agreed to send British military advisors, Bloomberg notes, while contemplating potentially bigger action - which has yet to be decided.

The key problem remains that after drones struck the kingdom's East-West oil pipeline, which is expected to be down for major repairs for a month or more, Riyadh is looking to increase its amount of oil shipments to offset the losses. Reuters has indicated at least five or six weeks for the pipeline to come back online.

And now it is both the Iranians and Houthis threatening its exports, and not to mention Shia militias out of Iraq (the latter believed responsible for the drone attack on the pipeline). Oil has soared since last week's Houthi blitz against the Saudi-backed Yemeni government, allowing it to tighten its 'siege for siege' policy against Saudi Arabia.

Not only do the Saudis desperately want British help in Yemen, but MbS is flying to Cairo Tuesday, where he will likely also asked President Abdel Fattah el-Sisi for military support.

Reports also say he wants Turkish help, especially in light of the recently inked Mecca Defense Pact - which so far hasn't resulted in any kind of 'Article 5-style' response.

Saudi wants British help in Yemen, MbS is flying to Cairo today presumably to ask Sisi for the same, and perhaps hoping for Turkish support as well

Really shortlisting on experience here: it's a coalition of the previously routed https://t.co/sUkLz08WqH

— Gregg Carlstrom (@glcarlstrom) September 15, 2026

As for where things stand on the battlefield, and amid more overnight reports of Houthis ballistic missiles fired on Saudi Arabia, one pundit has offered a hilariously accurate assessment of Saudi Arabia's performance thus far. Bill Buppert of The Libertarian Institute writes:

I’m not sure there has been a more incompetent regional military power as the Saudis since Italy in WWII. They have the 8th largest military budget in the world. The Saudis pour billions into their military for the very best state-of-the-art equipment which makes the result even more comical.

Their whole army is designed for vibes and aura farming.

They’re the opposite of the Italians. Italy had terrible production, equipment and leadership, but actually fought bravely, whereas the Saudis are given all the equipment and advisors they could dream of and still fail.

Mind you, the current conflict is primarily between the Yemeni military and Houthi militants. Currently the Saudis only provide logistical support and airstrikes.

The whole first book of Dune revolves around underestimating the Fremen.

The commentator then concludes: "Money can’t buy competence" - after Washington and London have spent decades sinking billions into Saudi military readiness and base infrastructure.

Tyler Durden Tue, 09/15/2026 - 08:40

Futures Drop As Yields, Oil Prices Keep Rising

Futures are lower - but well off session lows thanks to some well-time oil sell orders just before US traders walked in to work - as bond yields continue to make new highs, with both Nasdaq and Russell lagging the S&P which feels like more de-risking into tomorrow's Fed release. AS of 8:15am ET, S&P and Nasdaq futures are down 0.1% amid premarket weakness in Mag7 with GOOG / META / MSFT all down at least 90bp but NVDA in the green helping Semis outperform on the move lower. Memory / Korea names are bid despite Kospi closing lower. Energy, Utils, and pockets of Healthcare are higher with the other sectors weaker pre-market. The yield curve is bear steepening as yields continue to march higher in response to oil/energy and growth. The 10Y rose as high as 5.04% before retracing back to around 5.0% USD is stronger. Crude is +2% as the UKR / RU détente on striking energy infra fails to materialize and growing chatter of UK aiding Saudis in fighting the Houthis. Ags are mixed and Metals are weaker, with Base outperforming Precious. Today’s macro data focus is on weekly ADP and Empire Mfg.

In premarket trading, Mag 7 stocks are mostly lower: Nvidia +0.5%, Tesla -0.1%, Amazon -0.2%, Meta -0.5%, Apple -0.6%, Alphabet -0.9%, Microsoft -0.9%

• Cryptocurrency-linked stocks fall on waning optimism that a comprehensive US crypto regulatory bill will progress this week.
• Dave & Buster’s (PLAY) drops 13% after the restaurant and arcade chain operator reported revenue for the second quarter that missed the average analyst estimate.
• Eli Lilly (LLY) is up 1.3% after Berenberg upgraded the pharmaceutical giant, with analysts arguing it’s worthy of a more significant valuation premium due to its superior growth profile and the breadth of its pipeline.
• Enova International (ENVA) falls 18% after the financial services company withdrew its applications with the Office of the Comptroller of the Currency and the Federal Reserve for the acquisition of Grasshopper Bancorp.
• Etsy (ETSY) rises 3% after Oppenheimer upgraded the online retailer to outperform, citing improvements the company is making to its platform.
• Forgent Power Solutions (FPS) gains 9% after the power equipment company reported fourth-quarter revenue and adjusted Ebitda above a guidance range given in May. The company’s backlog grew 256% year-over-year.
• Vera Therapeutics (VERA) jumps 12% after the drugmaker gave updated results from a late-stage trial of its recently approved drug for a kidney disorder.
• Waystar (WAY), which provides payment-related software to health-care organizations, rises 12% after a Reuters report that said the company is exploring options that include a sale. The report cited sources familiar with the matter.

In other corporate news, Enova International withdrew its bank regulatory applications for the acquisition of Grasshopper Bancorp. Dave & Buster’s shares fell in premarket trading after the restaurant and arcade chain operator reported second quarter results below expectations.

Elevated bond yields, which overnight hit a new 19 year high of 5.04% before reversing, are setting the tone for markets, placing surging energy costs and mounting debt firmly on traders’ radar. Enthusiasm for the AI trade, the major driver of equity gains this year, also remains tempered as debate rages over whether the technology may inflict catastrophic harm. A surprising note from Goldman found that the momentum trade is shifting notably under the surface. 

“Of course the bond selloff is weighing on tech and growth stocks,” said Louis Puga at Societe de Gestion Prevoir. “There are really two worlds at play here: on one side healthy corporate balance sheets and profits, and on the other side countries running big deficits and putting pressure on the bond market.”

The weakness in bonds raises the stakes ahead of the Federal Reserve’s interest-rate decision on Wednesday, for which money markets are pricing in more than a 90% chance of a hike. If officials hold off, or Chair Kevin Warsh signals a shallower-than-expected path of tightening, investors may demand even higher yields as protection against inflation.

“After years of inflation overshooting target, the Fed’s credibility is under scrutiny,” wrote Jenny Zeng at Allianz Global Investors. Warsh’s “recent comments leave little doubt that restoring price stability remains the priority. September is the meeting where that commitment is put to the test.”

A resilient economic backdrop and cautious investor positioning suggest the equity market can absorb more pressure before the rally comes under threat, Bloomberg proposes. “Being early is the same as being wrong, so I’d be careful not to declare the game over too soon,” Rowe says. Still, investors are keen to make protective moves: Hedging demand is ticking higher, with three of the four largest VIX trades this year all taking place in the last two weeks.

Underneath the AI rhetoric, the picture is more nuanced. Growth won’t suddenly change and adoption and token use remain high, while any move by leading AI developers to slow the frontier could hand an advantage to some of the hyperscalers. Still, investors are likely to become more selective about picking potential winners. 

Monday’s chip drawdown was also reflective of positioning: The latest BofA global fund manager survey revealed that long global semiconductor stocks is the single most crowded trade, according to more than half of respondents. The poll also showed fading exuberance around risk assets, with net 49% of managers now overweight global equities compared with 56% last month.

In politics, the Supreme Court refused to clear the Postal Service to enforce new restrictions on mail-in ballots for the midterm elections, rebuffing the Trump administration’s request to intervene. Gavin Newsom said he would not run for president in 2028 if Kamala Harris enters the race, ruling out a potential primary showdown between two of California’s most prominent Democrats.

Europe’s Stoxx 600 fell 0.2%. Deutsche Bank slipped more than 2%, echoing declines among US peers after Bank of America warned that trading revenue for the current quarter will be flat. Regional bonds were mixed. Here are the biggest movers Tuesday:

• Kety shares rose as much as 9.7% after the Polish aluminum products and packaging maker agreed to buy Italy’s Metra from KPS Capital Partners
• Shares in Acciona Energía and parent Acciona advanced after newspaper Expansión reported that EQT and Norges Bank Investment Management have joined forces to bid for the Spanish renewables company
• Defense stocks outperformed a struggling broader market on Tuesday morning, with the sector boosted by US inventory shortfalls and news that Japan could raise defense spending
• Wickes shares rose as much as 9.9%, the biggest intraday gain since May 2025, after the home improvement retailer reported a “significantly improved trend” in the third quarter and said it remains confident it can meet full-year expectations
• Kier shares rose as much as 4.8%, the most since July, after the UK infrastructure contractor’s FY26 results showed continued growth in orders and the firm announced it would reallocate capital for property investment toward the balance sheet
• Schott Pharma climbed as much as 5.5%, the most in almost a month, as JPMorgan initiates at overweight with a Street-high €27.1 price target, citing supportive structural trends and the German pharma packaging company’s market leading role
• Trustpilot shares dropped as much as 20%, the most since December 2025, after the online review platform’s results were “noisier than usual” according to JPMorgan analysts, who noted one-off items that impacted the firm’s top-line and lack of a guidance upgrade
• European lenders declined following US peers weakness after Bank of America’s CEO said trading revenue will be “relatively flat” compared with last year’s third quarter
• Lundbeck shares slid as much as 5.9%, the most since February, after Deutsche Bank downgraded the pharmaceutical company to sell, noting headwinds including a patent cliff for Rexulti that are set to weigh on sales in the medium term
• Deutz shares fell as much as 7% after the German engine manufacturer successfully completed a cash capital increase via accelerated bookbuilding
• UniCredit shares fell as much as 2.9% after RBC Capital Markets initiated coverage at sector perform, saying there are few catalysts for a rerating of the Italian lender while earnings are clouded by its ongoing attempt to acquire Commerzbank

Asian stocks declined, dragged by financials, as headwinds mount for the market on higher oil prices and US 10-year Treasury yields breaching the 5% mark. The MSCI Asia Pacific Index dropped 1%, poised for a fourth-straight session of losses. Asian banks declined, following US peers lower after Bank of America said its trading revenue will be “relatively flat.” Singapore led broad losses across the region, while equities rose in Vietnam. Spiking bond yields and oil prices are weighing on the macro outlook ahead of expected monetary tightening this week in the US and Japan. The Asian benchmark has fallen 3.7% over four days. Asian banks may take some cue after JPMorgan and Morgan Stanley give some color on trading revenue at a conference in New York tonight, said Kieran Calder, head of Asia equity research at Union Bancaire Privee.

Meanwhile, Citigroup cautioned that bearish bets have increased across global markets, with Asia having the weakest positioning. On the other hand, BlackRock has returned to an overweight recommendation on emerging-market equities including South Korea and Taiwan, betting that access to scarce resources needed for the AI boom and strong earnings will drive outperformance.

“Rising yields and energy prices are creating a risk-off environment,” said Bilal Khan, head of international equity sales, at Arif Habib. “Chip-related stocks did show some resilience earlier in the session before adding to the selloff.”

In FX, the Bloomberg Dollar Spot Index rises for a second day, with the yen underperforming.

In rates, bond markets continue to decline, with 10-year US Treasury yields hitting the highest since 2007. Yields are higher across the board in Europe too. Treasuries are mixed in early US session with long-end yields still about 2bp cheaper on the day after retreating from session highs as oil gains fade. Yields across tenors reached fresh YTD highs, the 10-year its highest level since 2007.  Front-end Treasury yields are little changed, steepening 2s10s and 5s30s curves by about 2bp; 10-year is back around 5% after peaking at 5.04% Gilts hold similar moves following Telegraph report that the Bank of England could soon stop selling long-dated bonds
$13 billion 20-year bond reopening has WI yield near 5.41%, about 21bp cheaper than last month’s new-issue auction, which tailed by half a basis point, IG dollar issuance slate includes a couple of deals. Ten offerings totaling almost $24 billion were priced Monday with issuers paying about 2bp in new issue concessions on deals that were 4.1 times covered. At least five borrowers stood down Monday, setting the stage for another heavy slate Tuesday. US session includes 20-year bond reopening at 1 p.m. New York time.

US stock futures are falling. European equities are sinking too, with a drag from financial services and banking stocks, the latter after downbeat comments from Bank of America’s CEO on trading revenue in the third quarter.

In commodities, oil prices are up, with Brent rising above $108/bbl as traders weigh ongoing disruptions to supplies, before sliding around the time US traders (but mostly Jane Street) walked into the room.  WTI crude has pared a 2.8% gain to about 1%.Gold is sinking further below $4,300/oz and base metal prices have also dipped.

US economic data slate includes weekly ADP employment change (8:15am) and September Empire manufacturing (8:30am); Fed speakers remain in external communications blackout period around the Sept. 15-16 FOMC meeting

Market Snapshot

Top Overnight News

• Saudi Arabia has increasingly found itself caught in the middle of the war between the United States and Iran. Now, the kingdom’s leadership is assessing dwindling options on how to respond.  NYT
• The Defense Department’s inspector general released its first report on the war with Iran on Monday, saying the conflict has resulted in a shortfall of U.S. munitions and “bottlenecks” in supply chains as the Trump administration works to replenish weaponry. NBC
• Offering a grim assessment of Russia’s relations with the West, President Vladimir Putin pointedly warned European governments not to deploy any troops, including peacekeeping forces, to Ukraine, saying it would mean “war.” WaPo
• Ukraine on Mon said it would end energy attacks if Russia did the same, but Kyiv is skeptical Moscow will agree to a halt. CNBC
• Ukraine Strikes Russian Refinery, Drone Plant and Ozon Facility in Massive Overnight Attack: Kyiv Post
• Japan is considering a new mid-term defense spending target of 3.5% of GDP in line with NATO and other US allies, a move that could send a shockwave through financial markets concerned about Prime Minister Sanae Takaichi’s spending plans. BBG
• Japan Prime Minister Sanae Takaichi’s cabinet approved a plan to temporarily reduce the consumption tax on food, moving closer to delivering on a key election pledge to ease the burden on households from the soaring cost of living. BBG
• The Bank of England ​is poised to announce this week that it will stop selling long-dated government bonds which ‌have been hit by a global selloff in debt markets, potentially freeing up some cash for finance minister John Healey: Telegraph 
• China’s domestic economic indicators weakened further last month, piling pressure on policymakers to take more forceful measures to reinvigorate growth in the world’s second-largest economy. Retail sales grew 0.4% year-on-year in August, data from the National Bureau of Statistics showed on Tuesday, down from 0.6% growth in July and falling short of a median forecast of 0.8% growth. FT
• Industrial America is contending with a fresh wave of supply chain inflation as Donald Trump’s Iran war pushes up energy costs, tariffs raise import prices and the AI boom strains supplies of crucial electronics. FT
• There is another factor that could add Treasury bonds volatility into the mix: hedge funds, a growing force in this market. Hedge funds held about $2 trillion of Treasurys at the start of this year, more than double their holdings five years earlier, according to the Treasury Department’s Office of Financial Research, which said hedge funds controlled a record 7% of the market. Data released by the Federal Reserve on Friday suggests that funds’ Treasury holdings remain elevated. WSJ
• US House Democrats will reportedly challenge US Treasury Secretary Bessent on rising costs at the Financial Services Committee on Tuesday, Semafor reported citing a memo, with questions also to include bonds, tariffs, Russia, Iran and crypto.
• US Supreme Court rejected Trump administration mail ballot curbs for the Midterms.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mostly lower following the recent tech selling that was triggered by calls from industry CEOs for a slowdown in AI development, which President Trump pushed back against, while participants digested mixed Chinese activity data and await major central bank meetings. ASX 200 underperformed amid weakness in the mining, materials, resources and financial sectors, while risk sentiment was also not helped by the rising yield environment. Nikkei 225 was choppy, while Kioxia benefited from reports that Kioxia is weighing a US listing next year. However, the index then stumbled and briefly turned negative before rebounding again. KOSPI saw two-way price action amid the choppy mood in the local tech giants. South Korea's main stock exchange saw its first after-hours trading session, trading between 16:00-20:00 KST. According to data cited by Bloomberg, volatility spikes in individual stocks triggered brief trading halts 1,637 times, over 4x the number during the regular session. This shows the lack of liquidity provided and will therefore remain risky until institutional traders provide more liquidity. Hang Seng and Shanghai Comp were indecisive following several data releases from China, including a continued contraction in House Prices and mixed activity data in which Industrial Production topped forecasts but Retail Sales disappointed, while Fixed Assets Investment weakened and the Urban Unemployment ticked higher.

Top Asian News

• China's stats bureau said August economic activity was generally steady, though the impact of an unfavourable external environment is deepening. NBS stated residents' ability and willingness to spend should be enhanced, while it added the supply of high-quality goods and services should be improved.
• Japan is said to mull raising defence spending to 3.5% of GDP, according to Bloomberg. However, Finance Minister Katayama stated that she is not aware of the report.
• Japan Finance Minister Katayama said Japan will include that a food sales tax cut will be limited to two years in upcoming legislation and that Japan will assess tax revenue, review spending and aim to lower the debt-to-GDP ratio in the upcoming budgeting process. Katayama added that Japan will control new debt issuance through the combined initial and supplementary budgets. Furthermore, she said the government will maintain market credibility by reviewing spending and revenue and will not rely on deficit-financing bonds to fund tax cuts.
• Japanese PM Takaichi is set to reshuffle LDP executives on Wednesday ahead of a cabinet reshuffle on Thursday

European bourses (STOXX 600 -0.8%) are entirely in the red, as higher energy prices and yields continue to weigh on equities. Not much in terms of geopolitics overnight, outside of the continued strikes on Saudi airbases by the Houthis. On the data front, the UK jobs report was mixed; payrolls fell more than expected while the unemployment rate held steady. Little reaction was seen in the FTSE 100. Sectors highlight the negative bias, with Retail the only sector printing modest gains. Financial Services is the clear sector laggard, with Basic Resources and Consumer Products & Services following closely behind.

Top European News

• ECB’s Moulin said the current increase in long-term bond yields reflects higher supply and increased inflation expectations and added that the inflation outlook justified recent ECB rate rise. On government debt, he said member states must take steps to reduce budget deficits. Specifically for France, he said that France’s debt agency has no problem selling bonds, with no difficulty for the French Treasury in raising funds.
• Worldpanel said UK Grocery inflation at 2.3% in 4 weeks to Sep (vs 2.1% in Aug).

FX

• Snapshot: G10s are broadly lower against the USD, which continues to benefit from stronger energy prices and elevated yields. The JPY remains the underperformer on wider yield differentials, whilst high-beta Antipodeans have been pressured by the risk environment.
• DXY is firmer this morning and trades at the upper end of a 99.47 to 99.68 range. Strength is facilitated by higher energy prices and elevated yields, with the US 10-year topping the 5.00% mark. Should geopols/yields remain stable heading into the FOMC on Wednesday, then the index will likely hover within recent ranges.
• JPY continues to underperform, paring back a few weeks of strength. As mentioned previously, the next bout of strength for the JPY would likely require a hawkish BoJ this week - one which would see policymakers explicitly guide for a faster pace of rate hikes. Elsewhere, Finance Minister Katayama was on the wires earlier, where she stated that she was not aware of reports that the government plans to boost defence budget spending to 3.5% of GDP (vs current 1.9%).
• GBP has been hampered by the broad USD strength. Earlier, markets saw the release of a mixed Jobs/Wages report, whereby Unemployment remained steady at 4.9% (exp. 5%), whilst the wages components were in-line. Overall, it will not do much to shift views at the BoE ahead of Thursday’s meeting, where expectations are for rates to remain on hold.

Fixed Income

• Global fixed benchmarks are entirely in the red, and yields have risen to multi-decade/record highs. USTs (-14 ticks) are the clear underperformers, whilst Bunds (-20 ticks) and Gilts (-14 ticks) also remain in the red.
• USTs are the clear underperformers today. It appears that an accumulation of a) higher energy prices, b) hawkish Fed repricing, c) fiscal stability woes have all caught up to the benchmark. Moreover, there may be some concession heading into the US 20-year auction later today; for reference, the Japanese outing for the same maturity was solid.
• From a yield perspective, the US 10-year (5.02%) holds beyond the key 5.00% mark, after making a peak of 5.04% earlier this morning. This brings the yield to levels not seen since the GFC. The Fed policy decision on Wednesday should see yields edge off highs (at the long-end), however, a convincing breach below the 5% mark would also likely require a hawkish SEP/commentary. This, in theory, would help ease stability concerns at the long-end; but of course, other factors such as AI-issuance and the Middle East crisis will temper any moves lower.
• Gilts are pressured alongside peers, given energy dynamics. Earlier, a mixed jobs/wages report had little impact on Gilts at the open; the Unemployment Rate remained at 4.9% (exp. 5%), whilst wages were in-line. On the supply side, The Telegraph reported that the BoE has reportedly written plans with the DMO to overhaul its money-printing programme, with plans to stop selling 20- and 30-year gilts.
• Bunds follow the above. There was little move to WPI, which saw the M/M top expectations. Thereafter, the German ZEW Survey was released, where Economic Sentiment rose incrementally from the prior, whilst Current Conditions improved. No move was seen in Bunds following the data.
• The Bank of England has reportedly written plans with the DMO to overhaul its money-printing programme, with plans to stop selling 20- and 30-year gilts, according to the Telegraph.
• Germany sells EUR 3.817bln vs Exp. 5bln 2.70% 2028 Schatz: b/c 1.26x (prev. 1.49x), average yield 3.27% (prev. 2.85%), retention 23.66% (prev. 23.4%).
• UK sells GBP 1.25bln 2029 Gilt via Tender: b/c 3.65x (prev. 3.61x), average yield 4.818% (prev. 4.062%).
• Japan sells JPY 532.1bln 20-year JGBs: b/c 4.01x (prev. 3.98), average yield 3.856% (prev. 3.698%), Tail in price 0.15 (prev. 0.17).

Commodities

• WTI Oct and Brent Nov futures remain firmer as the Middle East conflict continues to underpin the complex, with Saudi Arabia’s East-West pipeline still offline following attacks, Riyadh seeking to boost shipments through the Strait of Hormuz, and Iran reiterating that the Strait remains closed and under its control. WTI trades towards the bottom end of a USD 101.83-103.49/bbl range (vs yesterday’s USD 100.53-104.95/bbl range), while Brent resides close to the current intraday peak within a USD 106.25-107.86/bbl range (vs yesterday’s USD 104.80-109.80/bbl range).
• Dutch TTF are currently flat and off earlier highs, trading around EUR 82.50/MWh within a EUR 81.76-83.42/MWh range (vs yesterday’s EUR 79.52-84.50/MWh range), with the increasing energy-supply risks continuing to underpin European gas ahead of winter.
• Precious metals are softer as the firmer USD and high oil prices reinforce expectations of a Fed hike tomorrow. Spot gold has slipped back below USD 4,300/oz and trades within a USD 4,261-4,317/oz range (vs yesterday’s USD 4,253-4,355/oz range), with the 100 DMA at USD 4,328.90/oz).
• Base metals are subdued amid the firmer USD, softer risk tone and mixed Chinese activity data, with weak retail sales and investment offset somewhat by stronger industrial production. Copper is also pressured by fresh deliveries into LME warehouses signalling easing supply tightness. 3M LME copper trades on either side of USD 14k/t in a USD 13,985.85-14,083.68/t range.
• Half of Russia’s leading diesel-producing refineries have reduced output following drone strikes.
• Libya's oil and gas minister said they plan to raise nat gas production to 4bln SCFD within 3-5 years.
• EPA Administrator said the US is proposing to rescind all major greenhouse gas emission standards for all power plants.
• Oman November OSP for November delivery set at USD 128.48/bbl.
• China Steel Association said it condemns overproduction and urges controls and urges for supply-side remedies, and strictly enforces output controls.

Central Banks

• ECB staff committee urged for clarification whether President Lagarde will leave before the end of the term, warning that prolonged uncertainty risks damaging trust in the institution, according to FT.
• NBP's Zarzecki said there's minimal room for Polish rate changes until end-2026.

Geopolitics: Iran

• Iranian Parliament Speaker Ghalibaf said Iranian forces have full control of the Strait of Hormuz and will prevent enemy vessels from crossing.
• Iran's top security official Rezaei said don’t get distracted by the US President’s mixed signals from 'no negotiations' to 'we’re ready to talk', while he added that stakes around oil and the straits have changed, damage control won’t stop what’s coming, and there will be no talks until Iran's conditions are met, period!
• Iran's Foreign Minister Araghchi held a phone call with Lebanon's House of Representatives Speaker Berri and discussed the need to strengthen coordination to confront Israel's efforts to ignite wars against Lebanon and countries in the region. Araghchi stressed Iran's keenness to preserve Lebanon's national sovereignty and territorial integrity in the face of Israeli aggression, while he affirmed Iran's full support for the proud Lebanese resistance in the face of Israeli occupation and aggression.
• UKMTO said they received a delayed report of an incident in the Strait of Hormuz, stating that a vessel has been struck by an unknown projectile.
• UN Security Council will hold an emergency meeting on Tuesday regarding developments around the Bab Al-Mandab Strait, according to Fars News Agency.
• Iranian Foreign Minister Araghchi held talks with the leader of Iraq’s Patriotic Union of Kurdistan (PUK).

Geopolitics: Ukraine

• Sources cited by Russian press said US President Trump's statement on an energy truce is "an impromptu move", and that no decision was made on an energy truce in the latest talks in Moscow between the US delegation and Russian President Putin.
• Russia Foreign Minister Lavrov said that the US has never offered concessions to Russia over the Ukraine conflict in exchange for Moscow’s assistance in resolving the Iranian issue, Interfax reported. Furthermore, Lavrov said Russia is ready for reasonable compromises on Ukraine.
• Russia Foreign Minister Lavrov plans to meet US Secretary of State Rubio on the sidelines of the UN General Assembly in New York, RIA reported.
• Ukraine President Zelensky said Ukrainian forces made new gains at the Syzran refinery and struck a UAV production facility in Taganrog, a UAV preparation and launch base in the Oryol region, and targets in the Black Sea
• NATO military jets were scrambled in Lithuania due to a drone near Vilnius and a military fighter jet shot down the drone in Lithuanian airspace, according to the National Crisis Management Centre.
• A Russian presidential aide warned that if Poland enters a war against Russia, Moscow would use its entire military arsenal.

US Event Calendar

• 8:30 am: United States Sep Empire Manufacturing, est. 15, prior 20.6

DB's Jim Reid concludes the overnight wrap

As I continue to bravely soldier on through manflu, markets have started the week with a few notable coughs and splutters as inflationary fears and talk of an AI slowdown have led to a difficult 24 hours. Although the weekend talk was all about AI, the broader market driver was a fresh rise in energy prices, with Brent crude (+1.02%) closing at $105.68/bbl, and back above $107 this morning, while European natural gas futures (+3.83%) hit their highest since 2022. So that pushed bond yields to multi-year highs, and we even saw the 10yr Treasury yield (+2.0bps to 4.99%) move above 5% in trading for the first time since 2023. It's back above that level in Asia as I type. The 5% threshold alone would have been a newsworthy day, but we simultaneously saw a huge slump for chip stocks given the AI slowdown headlines, with the Philly semiconductor index (-5.86%) posting its worst day since July. So it was another session where September lived up to its reputation as the worst month of the year for asset performance, with bonds and equities continuing to struggle. Today we'll hear from US Treasury Secretary Bessent in his testimony to the House Financial Services Committee. It'll be interesting to see if he tries to lean in some credible way against the rising tide of bond yields.  

Before this, geopolitical headlines were the biggest factor behind yesterday’s selloff. In part, this followed Friday night's closure of Saudi Arabia’s east-west pipeline, which acts as an alternative to the Strait of Hormuz. There was hope this was largely precautionary, but the Associated Press reported officials yesterday who said the repairs could take 3-5 weeks. So with another supply route taken out, that added to fears about a lengthier period of disruption. In addition, as we discussed yesterday morning, the meeting between Iran and other Gulf nations about a temporary shipping lane in the Strait of Hormuz scheduled for Monday was postponed on Sunday. We don’t have the exact details, but Bloomberg reported that a source had suggested this was partly because of Saudi Arabia’s frustration at Iran-backed groups continuing attacks on its territory. So that dampened hopes about traffic resuming through the Strait of Hormuz anytime soon. 

We did see a decent turnaround later in the session after President Trump posted that Russia and Ukraine had agreed to halt their strikes on energy targets and made a series of posts about Iran, including that it “wants to make a deal, quickly and badly”. It later appeared that any Russia-Ukraine deal on energy strikes was not actually agreed yet, with Ukraine’s President Zelenskiy acknowledging a “strong US proposal” while saying that Ukraine would suspend its strikes if Russia were to stop attacks on Ukraine’s “energy facilities, critical infrastructure and food supply routes”. Still, with Trump’s posts suggesting an increased sensitivity to higher energy prices, and with Iran’s ILNA citing Pakistani sources that the US was seeking a “step-by-step” agreement with Iran, the rise in oil lost some of its steam.

All that meant energy prices extended the large gains we saw last week but closed well off the day’s highs. For instance, Brent crude (+1.02%) settled at $105.68/bbl by the close, after trading as high as $109.80 at the start of the US session, while WTI was +1.34% higher to $101.39/bbl. Brent is another +1.54% higher this morning at $107.31, still comfortably off yesterday's highs but creeping back towards it. Over the other side of the pond, front-end European natural gas futures were up another +3.83% yesterday to a post-2022 high of €82.60/MWh.

That backdrop of building inflation meant investors priced in a growing chance of a full-blown hiking cycle for the months ahead. Indeed, the probability of a Fed hike tomorrow was up to 92% by the close last night, from 88% at the end of last week. And looking further out, 90bps of hikes are now priced by the June 2027 meeting, up +2.0bps on the previous day. That contributed to a fresh surge in Treasury yields across the curve, with the 10yr yield briefly moving above 5% for the first time since 2023. Yields did then turn lower, helped by Trump’s post on the energy strikes, but a late sell-off still saw yields end the day at their highest levels since autumn 2023. Ultimately, the 10yr yield (+2.0bps) closed at 4.99%, while the 2yr yield (+3.4bps) saw a larger rise to 4.66%. As mentioned at the top 10yr yields are now back above 5% in Asia, trading at 5.02% as I type. 

Over in Europe the fixed income sell-off was more consistent given the continent’s bigger exposure to higher energy prices. Moreover, a hawkish shift in ECB pricing drove a big selloff at the front end in particular. So among others, Germany’s 2yr yield (+6.8bps) jumped to 3.26%, the highest since September 2023, and the 10yr bund yield (+1.2bps) hit a post-2009 high of 3.51%. The larger front-end repricing came amid a larger rise in European inflation expectations, with the Euro 1yr inflation swap (+9.8bps) up to 3.60%, whilst the US 1yr inflation swap (+0.7bps) saw a marginal rise to 2.59%. Elsewhere in Europe, the 10yr OAT yield (+2.0bps) hit a post-2008 high of 4.47%, and here in the UK, the 10yr gilt yield (+2.4bps) hit a post-2007 high of 5.37%.

As all that was going on, there was a big selloff in chip stocks yesterday after the weekend calls for some kind of AI slowdown. So the Philly semiconductor index (-5.86%) had its worst daily performance since July. President Trump again pushed back against the prospect of an AI slowdown, as he had initially on Sunday, saying yesterday that the US already had “tremendous CRIMINAL and REGULATORY power over these companies!” And then in a separate post, he said that “the United States is leading, by a lot, every other country. Don’t kill the Golden Goose!” While this helped chip stocks recover a bit, they were back near the day’s lows by the close. That slump helped to drag US equities down more broadly, with the S&P 500 (-0.48%) seeing a decent fall, despite a narrow majority of companies in the index rising on the day. In Europe, the STOXX 600 (-0.49%) registered a similar loss.

Markets are lower again in Asia, but losses are relatively contained. As I check my screens, the S&P/ASX 200 (-0.89%), the KOSPI (-0.71%), the Hang Seng (-0.23%) and the Nikkei (-0.16%) are all in negative territory with mainland Chinese stocks just on the negative side. US equity futures are down a couple of tenths of a percent with European futures flat.

Early morning data showed that China’s industrial production grew 5.2% year-on-year in August, surpassing market expectations of 4.8% and accelerating from the 4.5% growth seen in July. The stronger-than-expected performance was largely supported by robust external demand, which continued to bolster export-oriented manufacturing despite broader signs of economic weakness. However, industrial production remained the lone bright spot in an otherwise challenging economic landscape. Fixed asset investment for the January-August period contracted by -7.2%, slightly worse than the -7.1% expected decline and deteriorating further from the -6.7% contraction recorded in the previous month. As a key indicator of both public and private capital expenditure in China, the metric has remained firmly in negative territory since April, highlighting persistent weakness in investment activity. Meanwhile, retail sales increased just +0.4% year-on-year in August, falling short of +0.8% expectations and slowing from the 0.6% rise seen in July. The data suggests that consumer spending in the world's second-largest economy remains subdued despite a series of stimulus and support measures introduced by Beijing.

Separately, China’s property sector continued to weigh on economic activity, with new home prices declining by -0.17% in August, nearly matching July’s -0.18% drop. The continued fall in housing prices underscores the ongoing challenges posed by the country’s prolonged real estate downturn.

Finally, there was very little data yesterday, although we did get Canada’s CPI print for August. That was exactly as expected, with headline CPI remaining at +3.0%, and the various core measures also in line with expectations. Against that backdrop, there was little change in market pricing for the Bank of Canada’s next meeting in late-October, with a 75% chance of a hike priced in by the close.
Looking at the day ahead, data releases include UK unemployment for July, the German ZEW survey for September, and the US Empire State manufacturing survey for September. From central banks, we’ll hear from the ECB’s Escriva and Cipollone. Otherwise, US Treasury Secretary Bessent will be testifying before the House Financial Services Committee.

Tyler Durden Tue, 09/15/2026 - 08:31

Will Trump Accounts Make Every Kid A Millionaire?

Authored by Paul Mueller via The Daily Economy,

No - or at least, not by the time they finish high school.

Depending on how they're funded, a Trump Account could turn a child into a decamillionaire by retirement, or it might just be worth about $4,300 on their eighteenth birthday. As with any account, three variables dictate the outcome: contributions, rate of return, and time.

What might Trump Accounts actually be worth for children born this year? A thousand dollars takes a very long time to become a million dollars. That initial thousand dollars for children born during this administration could grow to be $4,342.45 (8.5 percent annual return), $5,122.17 (9.5 percent annual return), or $6,032.83 (10.5 percent annual return) by the time they turn 18. That's nice, but not life-changing.

Does this mean Trump Accounts won't materially benefit a lot of kids? No. The magic of the numbers really comes from the basic principles of compound interest over long periods of time, not anything special or magical about the Trump Accounts themselves.

Extending the time horizon to retirement, however, is a different story. These Trump Accounts could be worth a lot if funded aggressively and left to compound over a lifetime. By the time a child born today reaches retirement age in 2093, that $1,000 seed money could be worth: $236,478.93 (8.5 percent annual return), $437,266.28 (9.5 percent annual return), or a whopping $804,030.69 (10.5 percent annual return).

Currently, Trump Accounts are limited to $5,000 annually of individual contributions, but qualified general contributions do not count toward this. So Michael Dell's $6.25 billion gift of $250 per child toward 25 million accounts will not count against the $5,000 annual limit. The claim about Trump accounts creating millionaires only works if one assumes the money compounds at an above market rate until the kids retire at age 67, or that they receive thousands of dollars of contributions into their account while children.

Maxing out the annual contributions ($5000/year, $90,000 over 18 years), however, will deliver impressive results. By the time they turn 18, those children will have a substantial endowment of $200,957 (8.5 percent), $222,078 (9.5 percent), or $245,691 (10.5 percent) depending on their rate of return. Extend that another 50 years or so to retirement and we are talking real money: ~$11 million (8.5 percent), ~$19 million (9.5 percent), or ~$33 million (10.5 percent).*

These calculations don't account for inflation. Prices may be three and a half (2 percent annual inflation) to seven times (3 percent annual inflation) higher in 67 years. So that eye-popping number of $33 million (which will not be a common outcome) may only be worth the equivalent of $4 to $10 million in today's dollars. While 10.5 percent is the historical long-term average annual rate of return for the S&P 500, it can vary quite a bit year to year and even decade to decade. More importantly, most children will not see maxed-out annual contributions to their accounts every year.

Becoming a decamillionaire requires $5,000 contributions per child annually for 18 years - no small feat for most people. One of the architects of Trump Accounts, Brad Gerstner, however, believes that hundreds of billions of philanthropic dollars will flow into these accounts every year. Plus, these accounts may serve as a focal point for family and friends who want to contribute to children's long-term prosperity - much as grandparents of an older generation would give long-term Treasury bonds to their grandkids.

But there were already tax vehicles to invest money for your own kids, like 529 education savings accounts. Trump accounts were created to facilitate broad-based direct-transfer philanthropy. Billionaires now have a mechanism for giving money directly to millions of people without government officials or NGOs taking a big cut. The distribution of the Dells' gift just hit children's accounts this week.

Will there be widespread adoption of Trump accounts, and will people contribute to them regularly? Less than a month after the rollout, Secretary Bessent said over seven million children were enrolled - a promising start. Will billionaires contribute significant amounts of their wealth to millions of kids through Trump accounts? Michael and Susan Dell's $250 per child gift, matched by Gerstner in Indiana and Dalio in Connecticut, has become a reality. And will Trump accounts provide a viable alternative to currently unsustainable entitlement programs like Social Security? These are a few very important questions that will determine how much Trump accounts impact American society.

It's true that Trump accounts, should they be held until retirement, could be worth impressive amounts of money, especially if people contribute every year their child is a minor. But 2093 is a long way off. Saving and investing for the far future is great. Parents will still have to decide whether sacrificing thousands of dollars today is worth tens or even hundreds of thousands of dollars in future decades.

*The account projections do not incorporate the program's permitted fund fees, which may be as high as 0.10 percent annually, per this White House explanation. Even a small fee matters over 67 years.

Tyler Durden Tue, 09/15/2026 - 08:05

BYD's EU Invasion Deepens Germany's Auto Industry Crisis

The rise of right-wing populism in Germany comes as globalist policies backfire and crush Europe's industrial powerhouse. The nation's auto industry is in shambles, with layoffs and production cuts, after European leaders had the brilliant idea of letting cheap Chinese EVs flood the struggling continent.

Bloomberg cites new data from Schmidt Automotive Research showing Chinese brands accounted for 10.7% of Western European car sales in the second quarter, up from 3.4% two years earlier, highlighting how BYD Motors's cheap $34,000 EV is quickly taking market share from domestic brands. 

Chinese EVs in the EU have seen quarterly registrations surpass those of Japanese brands. Citigroup analyst Harald Hendrikse estimates Chinese brands could capture 30% of the EU market by 2035 without additional protective measures. 

The immediate result of the flood of Chinese EVs on the continent has been restructuring news from Volkswagen that upwards of 100,000 jobs could be cut by the end of the decade. More recently, Jaguar Land Rover plans to cut 10% of its workforce. 

Beyond automakers, the ripple effect of layoffs is impacting parts supplier companies: 

European Auto Job Cuts

Auto Suppliers Job Cuts

Germany, previously resistant to tougher trade barriers, is preparing tariffs on Chinese hybrids as it watches its industrial base erode, stoking the rise of Alternative für Deutschland as German political elites betray working-class folks.

Protection could give domestic brands time to restructure. Still, China's dominance in batteries and rare earths gives Beijing potential means to retaliate, complicating Europe's effort to preserve its automotive industrial base.

The quick erosion of Europe's automotive industry is a national security risk for the continent because its factories, skilled workforce and supplier networks underpin the continent's capacity to produce weapons. At a time when the Russia-Ukraine war escalates and the Middle East conflict spreads, a diminished industrial base in Europe ahead of a much-needed rearmament supercycle is just bad news for EU defenses.

Tyler Durden Tue, 09/15/2026 - 07:45

Bloomberg Terminal Hikes Prices As Inflation Hits Wall Street's Data Bills

Bloomberg Terminal subscriptions will see a price hike starting Jan. 1, 2027, according to an email Bloomberg sent out early Monday.

Monthly subscription prices will increase by $140 per Terminal at locations with multiple licenses and $155 at locations with a single license. That's about a 3% price hike, or an additional $1,680 and $1,860 annually per subscription - ​​which range from $28,320 to $31,990 per year respectively.

Email: 

Existing subscriptions that renew on or before December 31, 2026 (and new Bloomberg Terminal subscriptions installed on or before the same date) will not see a price increase until their renewal date, as it occurs, in the following two years. 

Starting January 1, 2027, Bloomberg Terminal subscriptions will see a price increase of $140 per month per subscription for client locations with multiple licenses, and a price increase of $155 per month for client locations with a single license. When these increases take effect, they stay in place for two years. The average annual increase for the two-year term is 2.97%

"As always, we continue to invest in technology and talent to ensure we provide our customers with the highest quality products, services and support in the industry while adding enhanced capabilities," the email read.

Latest innovation on the Terminal .... a chatbot:

Bloomberg's price hike shows inflation continuing to pass through into market-data costs. It also strengthens the need for cheaper alternatives.

Tyler Durden Tue, 09/15/2026 - 06:55

My Two-for-Tuesday morning reads:

• What if Elon Musk Was Always Elon Musk? The most disturbing part of the controversial new four-hour documentary. (Slate)

• Why So Many AI Researchers Think the Machines Could Kill Everyone: A combination of rapid advances, recursive self-improvement, and agentic swarms are genuinely “spooking people” inside big labs. Will Knight on Rishub Jain, who left Google DeepMind after realizing that using AI to build the next generation of AI was removing humans from the equation. (Wired) see also AI Is Powerful Enough to Crack Our Hardest Math Problems — and Kill Us All: An Anthropic safety researcher puts the odds of annihilation above 10% — doomsday now more likely than Steph Curry missing a free throw. (Wall Street Journal)

​• ‘Offensively Cheap’: Solar Power Is Looking Up: Rachel Millard reports from Chakwal, Pakistan, where a cement maker is turning dry earth and peach groves into a forest of panels — solar already generates over a quarter of its power. (Financial Times)

• The Simple Request That Could Lower Your Mortgage Rate: Lenders can now consult two different credit-scoring models and pick the one that results in the lower rate ​. (Wall Street Journal)

• A Stealth Startup Thinks It Just Hacked the Memory Shortage: Kepler Computing claims a new approach to chip design—and a proprietary material—can help end the supply bottlenecks that have sent memory prices surging. (Wired)

• The GDR and Vietnam: From Fake Coffee to Coffee Empire: New stories from the East German specialists behind this Cold War project . Katja Hoyer on how East Germany’s coffee crisis turned Vietnam into one of the world’s great coffee producers. (Katja Hoyer)

​• The Man Who Refused to Sit on the Sidelines: Sally Jenkins on Kevin Dowdell, an elite FDNY rescue-unit lieutenant, who taught his sons to take action. When he disappeared on 9/11, they went to Ground Zero to search for him.  (The Atlantic)

• Trump Is Remodeling the White House. The Group Set Up to Protect It Has Stayed Quiet: The White House Historical Association, a nonprofit set up by Jacqueline Kennedy to preserve the building’s character, has declined to criticize the president’s changes.  Dan Diamond on the White House Historical Association — the nonprofit Jacqueline Kennedy set up to preserve the building’s character — declining to criticize. (Washington Post)

• People long for simpler times, say Practical Magic reboot stars: Mix together a beloved film simmering for decades, a sprinkling of social media hype and a generous glug of star power and you just might conjure up the long-awaited sequel to Practical Magic. Naomi Clarke on the decades-simmering sequel, with Joey King and Williams as Sandra Bullock’s daughters. (BBC)

​• Does the NBA Have an Owner Problem?: The Ringer on Ballmer, Mark Walter, and soaring team valuations — “Every day or every week, it’s like: Wait a second, how can that be possible?” (The Ringer)

Video of the day: China Found Something Better Than Oil

Be sure to check out our Masters in Business with Seth Bernstein, CEO of AllianceBernstein and Head of Asset Management of Equitable Holdings, the 69% owner AB. The firm manages $905.5B. Previously, he spent 32 years at JPMorgan Chase, where he eventually became the Global Head of Managed Solutions & Strategy at JPAM, responsible for all discretionary assets for Private Banking clients, and Global Head of Fixed Income & Currency. He eventually became CFO of JPM’s Investment Management & Private Banking division.

 

AI-pilled firms are growing headcount

Source: Ramp

 

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