We are now living “ten days that shook the world” in real life, as John Reed did that fateful autumn long ago in Lenin’s shadow as the Bolshies stormed the Winter Palace in October 1917 before he was resurrected to begin his next life as the chairman/CEO of Citicorp in 1984. Is this just a magic realism joke? No. The fall of Tsar Nicki and Tsaritsa Alix imperial regime marked a seminal moment in human history, as did the collapse of Glass Steagall and the meltdown of Sandy Weill’s banking empire in 2008.
Crude has plunged 20% on fears of global recession and a Saudi initiated price war that even Goldman Sachs’s Brent perma-bulls agree could well send black gold down to 40. Yet “the ghost of Jakarta” teaches me that when the Saudis abandon the role of swing producer at a time of crumbling demand as they did in Jakarta in July 1997, all bets are off. Crude bottomed at $10.
In a global recession, the 10 Year Treasury note yield should also tank but it has spiked from 3.90% to 4.50% on stagflation risk, a trillion dollar hedge fund basis trade gone horribly wrong, contagion in capital markets as varied as wholesale money in London, subprime, auto loans, mortgages, credit card receivables, Third World sov debt and above all, dealer financed repo markets. Equities are a side show. The real fear premium is in the bond/credit market bloodbath and anyone who now owns even an unleveraged private credit or real estate asset denominated in ex-King Dollar has now lost 50% of its value even if they do not know it yet since only the angels can mark to market risk that is unknown and unknowable. What happens next will make the Lehman/Liz Truss moment of 2025 ten days that will shake the world.
I watch the credit spreads go berserk, the liquidity vanishes from the secondary markets, the bid/offer spreads widen so wide that you can drive both a Mack and Tata truck through them (ok, Ashok Leyland too). Trump’s tariff tantrum has metastasized the financial cancer in the bond markets and returned the global economy into the Dark Ages that preceded the epic events of 1776. Not that conclave in the Philly we both loved, but the publication of Adam Smith’s Wealth of Nations, the most important book ever written by a philosopher in human history since the reveries of Sophocles, Marcus Aurelius and Cicero (verum, vetus amicus. Not to know history is to forever remain a child).
Idea du jour from my cerebrum’s frontal lobe. The Fed is back in QE mode because JayPo is now forced to become the Mommy of the markets, the lender of the last resort. So 1-year dirham bank deposit rates will fall to 1% even as the inflation rate spikes to 6%. This is the meaning of the $120 pop in Dr. Auric, my only true lodestar in the netherworld of offshore peekaboo finance. King Dollar is now King of Kings Dollar since Trump and ScottyB have checkmated China, the Dragon Empire with the biggest financial sting since Bernie Madoff. This sting was pure genius as it is a Pearl Harbor against Xi’s global trading network that earned the Middle Kingdom $1.1 trillion in exports in 2024. Game set match tournament and man of the millennium now belongs to Trump even as 1.3 billion Chinese now brace for the one recurrent theme of 3,000 years in Chinese history – when dynasties end, the Middle Kingdom rocks the casbah. It happened to the Tang, the Ming and the Manchus. The CCP dynasty lasted for exactly 98 years but the Red Emperor has lost the mandate of heaven and it is now payback time!
My Mag-4 have gone into outer space, led by Meta and NVDA. Will Jensen Huang be the first president of free China or will BABA’s Joe Tsai have that honor? Trump will win the Nobel Prize in economics and peace while being voted the sexiest man alive by the silicon beauties of Hollywood and Bollywood.
Also published on Medium.
