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Japan is now the biggest U.S. Treasury holder in the world, with approximately $1.2Tn. It’s the 4th largest economy in the world, and by far, the most indebted. Whatever happens to their economy, affects the world in a meaningful way, and they’re now at a crossroads. Their massive pile of debt is reflecting on its yield the inflationary pressures caused by economic stimuli, and their currency, remains weak, with the potential to weaken even further. The link to the U.S. econ

And just like that we’re in December, with 22 trading days to end 2025. The last month of the year is typically good for US stocks, with 73% of the months since 1928 being positive, as you can see in the chart below. The S&P500 is up 16.71% since the beginning of the year, and the Nasdaq 21.2%. Bitcoin is down 8.6%, and the dollar index (DXY) is also down 9.3%. Non US markets have so far outperformed the US, in an effort to close the valuation gap. The US bond Aggregate is up

Gold and Silver are having an incredible year. In fact, absent a rampant bull market in the last month of the year in Bitcoin, they might take the podium as the most profitable asset class (precious metals) for the year. Silver is up 90%, and gold is up 58% YTD. On Friday, the CME had a problem to open the futures market, that was supposedly related to the inability to deliver phisical silver to one big investor. Officially, it was due to a failure in the cooling system in th

AI is considered by many as the new economic messiah that will come to rescue the world from years of excessive spending and debt accumulation. It’s supposed to create a new growth paradigm that abound increase productivity in such a way that combined with robots, will make the current era look like Stone Age. But any version of this story, will not happen overnight and it will not happen in a straight line. If you look at the top chart below, you can see where all the CapE

Risk taking continues to accumulate on this market. Discussions about the “bubbleness” are not stopping investors from piling up on leverage, wether through traditional margin, or through vehicles that incorporate the loans in its creation, like leveraged ETFs. In the chart below you can see how both are trending up. On the bottom one, traditional leverage has reached $1.2Tn, which dwarfs the prior peaks of 2000 and 2008. On the top, the financial engineering of the leveraged

The U.S. Department of the Treasury released yesterday its Monthly Treasury Statement (MTS) for October 2025, revealing a federal budget deficit of $284.35 billion for the first month of fiscal year 2026. This figure marks a 10.4% increase from the $257.45 billion deficit recorded in October 2024. While the headline number suggests fiscal pressures are intensifying, a deeper analysis reveals a mix of one-off timing effects, policy-driven revenue boosts, and lingering disrupti

The Trump administration, through Treasury Secretary Bessent is finalizing the list of candidates for the Fed chair job. From the list, one can only infer that what the president is looking for is someone loyal, that is able to go beyond statistics and models to justify what’s needed. And what’s needed will be determined by the president, for the most part. The independence of the Fed will be deemed secondary, because the U.S. economy is at a point where everybody has to push

Just two weeks left of the last FOMC meeting of 2025, and the market has flippped the odds of a cut once again. And the round trip has happened within November. With no data on inflation and unemployment to make informed decisions, investors feared the Fed was not going to venture into additional cuts with the risk of increasing inflation. Then a 150 years study on tariffs effect on inflation by the San Francisco Fed popped up, providing some tehnical background supportive of

Bitcoin has been the poster child of every risk on strategy. Over the last 15 years, it has been the most profitable asset by far, except in 2014, 2018 and 2022, when it’s been the worst. Although it doesn’t have a long history, it looks like it shows cycles of 4 years with big swings up and down. And perhaps investors have detected that seasonality and have decided to arbitrage that. Over the last month and a half, Bitcoin has fallen more than 30%, questioning once again its

It looks like investors are debating wether the risk on trade should continue to roll. Over the last few years, the “buy the dip” strategy has worked very well, and passive strategies have had no competition vs traditional active ones, since you needed to have perfect timing to avoid the drawdowns and reinvest the money. “Time in” has beaten “timing”. Now look at the chart below: Thursday’s put volume was the 4th biggest ever in th CBOE, which if we take it as contrarian indi

Japan’s Cabinet, under Prime Minister Sanae Takaichi, approved yesterday a comprehensive economic stimulus package valued at ¥21.3 trillion ($135 billion). This marks the largest such initiative since the COVID-19 pandemic and represents Prime Minister Takaichi’s first major policy move since taking office in October 2025. The package aims to counteract a recent economic contraction (Japan’s GDP shrank by 1.8% annualized in the July-September quarter) and wants to address per

About 70% of all the trading in the US stock markets is done by algorithms. For F/X and derivatives it goes up to 80%. One of the most widely used trading strategy is known as VWAP (Volume Weighted Average Price), which basically looks at periods during a trading day with high volume, and tries to execute large block orders at that time to benefit from the liquidity. If 30% of the trading volume occurs in the first 2 hours, the machine will try to execute 30% of its order dur

NVDA results were published yesterday. Since it is the poster child of AI, and has become the backbone of the market and quite frankly, the economy, its financial health, has a huge impact on almost everything. In terms of revenues, the results are impressive. Revenues were up 62% YoY with a net income increase of 109%. That’s the impressive part. The worrisome part is the surging inventory ↑96% and the increase of +45% on accounts receivables, which implies declining Cash

For 30 years if not more, global investors have benefited from the Yen Carry Trade (YCT). The operation is simple: you borrow at very low rates in Yen, to invest in high yield or high return assets elsewhere, mainly in the US. If the Yen stays stable or weakens, you make a killing. But rates in Japan have started to go up, because for the first time in 30 years, and after spending a fortune in monetary stimuli, Japan has a little bit of inflation. As a consequence short rate

Federal Reserve Governor Christopher Waller addressed the Society of Professional Economists in London yesterday, emphasizing the use of economic theory and data to assess the U.S. economy amid a 43-day government shutdown that delayed official statistics. The title of the speech was “the case for continuing rate cuts”. His main points were: (1) weakening labor market, attributed to weak labor demand, (2) inflation under control, with tariffs causing one-off increases, but wi

The third-quarter 2025 earnings season for S&P 500 companies has been robust, with strong beats on earnings and revenue expectations despite some sector variability. As of mid-November 2025, 91% of the companies in the index have reported, here are some numbers: (1) 82% of reporting companies have beaten EPS estimates, surpassing the 5-year average of 78%. The aggregate earnings surprise stands at +7.0%. (2) Blended Revenue growth was 8.3%, the highest since Q3 2022, exceedin

The credit market continues to offer some warning signs, and unless things change, we might be close to a turning point. The chart below shows the avegare price of bonds that have split rating by agency, in the riskier frontiers of the credit spectrum. You can see that for BBB/BB and BB/B, there is still some stability, after the liberation day shock. But the B/CCC price difference has sinked below the April lows, which is an indication that investors are demanding more yield

The Fed has started to understand they might need to lower interest rates irrespective of their views on the economy. So they have started to document their epiphany. In the chart below, you can see a study by the Federal Reserve of San Francisco, where the review 150 years of tariff data an conclude that tariffs are in fact deflationary, and they end up increasing unemployment. The top part of the chart refers to the period where tariffs are enacted, and the bottom part show

Private funds are a hot topic today. After the episode of First Brands and the “cockroaches” comment from Jamie Dimon, they are being subject of an increasing scrutiny. At the center of that scrutiny is their valuation policies. How do you value a private asset that by definition is not subject to market forces? It besomes an art, particularly in times of stress. The chart below is a good example of how subjective valuations can be, and the dangers associated with private ass

With the government shutdown, the US has not had an official source of goods pricing for the economy. Private sector measures and other indicators have been used in their absence and all of them seem to indicate that inflation is starting to show up on the numbers again. As you can see in the chart below, more than half of the goods in the CPI basket have experienced a price increase of at least 3%, while the Fed’s official target continues to be 2%. This is due to tariffs a