Large US Companies Are Going Bankrupt At The Fastest Pace Since The Global Financial Crisis

Authored by Michael Snyder via The Economic Collapse blog,

Is the fact that large companies are filing for bankruptcy at the fastest pace in 15 years a good sign for the economy or a bad sign for the economy? I don’t even have to answer that question because all of you already know the answer. And as you will see below, other types of bankruptcies are soaring as well. We are a nation that is absolutely drowning in debt, and now bubbles are bursting all around us. I hope that you have positioned yourself for what is about to happen, because the months ahead are going to be rough.

According to Newsweek, 446 large companies filed for bankruptcy during the first seven months of this year.  That is the highest total that we have seen since 2010…

The U.S. saw a sharp increase in corporate bankruptcy filings in July, according to a recent report, reaching a post-COVID peak and placing 2025 on track to surpass last year’s total.

S&P Global Market Intelligence, the research and data arm of the credit-rating agency, found that filings by large public and private companies rose to 71 last month from 66 in June, marking the highest monthly tally since July 2020. So far in 2025, meanwhile, the total of 446 bankruptcy filings is the highest for this seven-month stretch since 2010.

In 2010, we were experiencing the tail end of the global financial crisis.

So there was a very good reason for why so many large companies were going bankrupt at that time.

What reason do we have for what we are witnessing right now?

Of course it isn’t just large companies that are going bankrupt in staggering numbers…

Personal and business bankruptcy filings rose 11.5 percent in the twelve-month period ending June 30, 2025, compared with the previous year.

According to statistics released by the Administrative Office of the U.S. Courts, annual bankruptcy filings totaled 542,529 in the year ending June 2025, compared with 486,613 cases in the previous year.

Business filings rose 4.5 percent, from 22,060 to 23,043 in the year ending June 30, 2025. Non-business bankruptcy filings rose 11.8 percent to 519,486, compared with 464,553 in the previous year.

Wow.

I had no idea that the bankruptcy numbers were that bad.

An 11.5 percent increase in bankruptcy filings in just one year is a really troubling sign.

And it turns out that the number of farm bankruptcies in the United States has been spiking as well…

Hit with high interest rates and labor shortages, more American farmers are filing for bankruptcy, according to new data from the University of Arkansas.

Researchers found that more than 250 farms filed for Chapter 12 bankruptcy between April 2024 and March of this year, marking a sharp increase in financial distress across the agricultural sector.

“We’ve already beat last year in terms of Q1 national filings,” said Ryan Loy, an economist at the university. “Once you see this on a national level, it’s a clear sign that financial pressures that we saw before in the 2018 and ‘19 are kind of reemerging.”

A lot of people out there are in denial about what is really happening to the economy.

We have been on an unprecedented debt binge for many years, and now we are beginning to experience the consequences.

Millions upon millions of Americans are in way over their heads, and there is no easy way out.

At this point, approximately two-thirds of Americans that are carrying debt admit “to minimizing or hiding it from others”…

The study of 1,078 adults by Self Financial exposes a nation drowning not just in debt, but in the shame that comes with it. Of those carrying debt, 66.3% admitted to minimizing or hiding it from others. This breaks down to 28.1% outright lying about their situation, 20.8% downplaying how bad things really are, and 17.4% avoiding the topic entirely.

We may want to hide our financial distress from others, but there is no way to hide it from ourselves.

Americans have become so obsessed with financial troubles that they are thinking about it constantly…

Between bills to pay, tariff news and inflation worries, money is living rent-free in Americans’ minds.

They’re spending nearly four hours a day on average thinking about it, according to new research from Empower, a financial services company.

Needless to say, that isn’t healthy.

Continually worrying about your finances can eat you alive.

But this is what daily life is like for so many people these days.  One recent survey discovered that 53 percent of Americans are feeling financial stress “more acutely than ever”…

At 54%, a little more than half of the 2,206 adults surveyed said they’re thinking about it more than they did last year. In fact, the June survey found 53% of Americans said they’re feeling financial stress “more acutely than ever,” including 62% of Gen Xers and 41% of baby boomers.

One of the biggest reasons why Americans are feeling so much financial stress is because we are spending an average of 42 percent of our incomes on housing costs…

More than half of Americans say they’re paying too much for housing, with the average person spending 42% of their income on housing costs.

Meanwhile, just about everything else that we regularly spend money on has been getting increasingly more expensive.

For example, beef prices just keep hitting brand new record high after brand new record high…

Grocery prices have been climbing and one area where prices have hit a record high is beef, a staple for many households.

Ground beef, usually the inexpensive choice for shoppers, has hit a record high. Shoppers can expect to pay $6.25 per pound, up from $5.49 a year ago and $4.26 five years ago, in July of 2020.

The average price for beef steaks has hit $11.87 a pound as of July. That’s up from $10.85 in July of 2024 and $8.69 in July of 2020.

And coffee prices have jumped more than 30 percent over the past year…

A more than 30% year-over-year rise in retail prices for coffee is staggering — and consumers are not likely to see relief anytime soon, even as a merger between two beverage giants looks to create an entity that can better manage rising costs.

If we stick our heads in the sand and keep repeating “everything is going to be okay”, will that make things better?

Of course not.

We need to realize what is happening and adjust our plans accordingly if we are going to navigate through this very harsh economic environment.

For one thing, if you have a good job right now please do not give it up unless you absolutely must do so.

Mass layoffs are being conducted all over the nation, and yet another example of this was just in the news…

Nearly 1,000 corporate Kroger employees are losing their jobs after the company previously announced its intentions not to lay off employees.

The layoffs come after the grocer decided to shutter more than 60 underperforming stores by the end of 2026.

Kroger initiated the closures as a way to cut costs following its failed $25 billion merger with Albertsons.

Sadly, I think that a lot more Americans will lose their jobs in the months ahead.

And since most of the population is living paycheck to paycheck these days, those that lose their jobs are at risk of losing everything.

There was no way that we were going to be able to pile up debt indefinitely.

We have now reached the “bubbles are bursting” chapter of our story, and it certainly isn’t going to be pleasant.

Michael’s new book entitled “10 Prophetic Events That Are Coming Next” is available in paperback and for the Kindle on Amazon.com, and you can subscribe to his Substack newsletter at michaeltsnyder.substack.com.

Tyler Durden Tue, 09/02/2025 - 13:45

US Revokes Taiwan Semi's Waiver For China Shipments Of Chip Supplies

Following Trump's decision to take a 10% stake in Intel, many were wondering just how the US government could steer business and order flow to its latest startegic investment. Here's how. 

This morning the US revoked Taiwan Semiconductor Manufacturing's (TSMC) authorization to freely ship essential gear to its main Chinese chipmaking base, curtailing its production capabilities at that older-generation facility.  The revocation will require suppliers to the chipmaker's China facilities to proactively seek US licenses for shipments of goods that are covered by US export controls, including advanced manufacturing gear and spare parts.

Taiwan Semi Nanjing facility.

According to Bloomberg, American officials recently informed TSMC of their decision to end the Taiwanese chipmaker’s so-called validated end user, or VEU, status for its Nanjing site. The action mirrors steps the US took to revoke VEU designations for China facilities owned by Samsung Electronics and SK Hynix. The waivers are set to expire in about four months. 

“TSMC has received notification from the U.S. Government that our VEU authorization for TSMC Nanjing will be revoked effective December 31, 2025,” the company said in a statement. “While we are evaluating the situation and taking appropriate measures, including communicating with the US government, we remain fully committed to ensuring the uninterrupted operation of TSMC Nanjing.”

The Trump admin's latest decision jeopardizes the China operations of some of the most important companies in the semiconductor sector, hailing from two chipmaking powerhouses that are also US allies. While US officials have said they intend to issue licenses needed to keep those facilities operational, the shift from blanket permission to individual approvals introduces uncertainty about wait times to actually secure those permits. Officials are currently working on solutions to ease the bureaucratic burden, particularly given a significant backlog of existing license requests, people familiar with the matter said. 

Compared to Samsung and SK Hynix, which house a sizable share of their production in China, TSMC’s manufacturing footprint in the world’s second-largest economy is relatively small. The company’s Nanjing site began production in 2018 and contributed a small fraction of TSMC’s total revenue last year. The campus houses technology as advanced as 16-nanometer, which first became commercially available more than a decade ago. 

BIS announced its VEU decision for the two South Korean companies last week, saying that the US was closing “export control loopholes” that put American companies “at a competitive disadvantage.”

The agency also formally rescinded Samsung and SK Hynix’s VEU status in the federal register, a public account of US regulations — and they did the same for a VEU designation given to Intel Corp., for a facility in Dalian, China, that SK Hynix has since acquired. That action will require US officials to process an additional 1,000 license requests annually, according to a federal notice.

Because TSMC’s VEU status was never published in the federal register in the first place, there was not a public regulation for BIS to amend in the same way as for the other affected companies. All told, though, the net effect on TSMC, Samsung and SK Hynix is the same: When the VEU revocation takes effect, suppliers to the chipmakers’ China facilities will need to proactively seek US licenses for shipments of goods that are covered by US export controls. That includes everything from advanced manufacturing gear to spare parts and chemicals that are consumed in the production process. 

The situation highlights the extent of Washington’s influence in, and control over, the supply chain for electronic components that power everything from microwaves to phones to data centers training artificial intelligence algorithms — even when the plants in question are operated by three non-American companies in a foreign country. 

The US has broadly limited China’s access to American materials and equipment that could be used to make advanced chips, part of a suite of controls designed to limit the Asian nation’s AI prowess. The export curbs affect sales not just to Chinese companies, but any facilities that are physically within the country — including Samsung, SK Hynix and TSMC’s plants. 

Tyler Durden Tue, 09/02/2025 - 13:25

Kraft Heinz Board Greenlights Breakup Into Two Public Companies "To Maximize Value"

Kraft Heinz will split into two publicly traded companies, separating its faster-growing condiments and meals brands from the slower grocery products unit. One of the new entities will be called "Global Taste Elevation Co.," with the spinoff expected to close in the second half of 2026.

News of the split - effectively the unwinding of the Kraft Heinz mega-merger orchestrated by 3G Capital and Warren Buffett a decade ago - comes just three and a half months after CEO Carlos Abrams-Rivera told investors the company was evaluating potential "strategic transactions" to boost its stock price.

"The separation is designed to maximize Kraft Heinz's capabilities and brands while reducing complexity, allowing both new companies to more effectively deploy resources toward their distinct strategic priorities," Kraft Heinz wrote in a press release, adding, "This focus will enable stronger performance while preserving the scale to compete and win in today's environment." 

Here's an overview of Kraft Heinz's planned split into two public companies:

Global Taste Elevation Co.

• $15.4B in 2024 net sales; $4B in adjusted EBITDA.

• Core brands: Heinz, Philadelphia, Kraft Mac & Cheese.

• 75% of sales from sauces, spreads, and seasonings.

• 20% of sales from emerging markets; 20% from foodservice ("Away From Home").

• Concentrated on driving industry-leading growth across categories and geographies.

North American Grocery Co.

• $10.4B in 2024 net sales; $2.3B in adjusted EBITDA.

• Core brands: Oscar Mayer, Kraft Singles, Lunchables.

• 75% of sales from #1 or #2 category brands.

• To be led by current Kraft Heinz CEO Carlos Abrams-Rivera.

• Strategy: deliver stable free cash flow via operational efficiency and brand expansion.

Here are more details about the transaction:

• Kraft Heinz's board unanimously approved a tax-free spinoff, creating two independent, publicly traded companies.

• Overall mission: reduce complexity, sharpen strategic focus, and unlock long-term shareholder value.

• Current dividend level expected to be maintained; both firms will target investment-grade capital structures.

Kraft Heinz CEO Abrams-Rivera described the split as a "move that will unleash the power of our brands and unlock the potential of our business." 

The move to unlock shareholder value comes as shares in New York have slumped to Covid lows, down around 37% since peaking in mid-2021. 

How this ultra-processed foods giant - much like PepsiCo - will survive in the era of Health and Human Services Secretary Robert F. Kennedy Jr. reshaping America's toxic processed food supply chain remains to be seen.

Tyler Durden Tue, 09/02/2025 - 12:45

From the Census Bureau reported that overall construction spending decreased:

Construction spending during July 2025 was estimated at a seasonally adjusted annual rate of $2,139.1 billion, 0.1 percent below the revised June estimate of $2,140.5 billion. The July figure is 2.8 percent below the July 2024 estimate of $2,200.7 billion
emphasis added

Private spending decreased and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $1,623.3 billion, 0.2 percent below the revised June estimate of $1,626.3 billion. ...

In July, the estimated seasonally adjusted annual rate of public construction spending was $515.8 billion, 0.3 percent above the revised June estimate of $514.3 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential (red) spending is 9.4% below the peak in 2022.

Private non-residential (blue) spending is 6.9% below the peak in December 2023.

Public construction spending (orange) is at a new peak.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is down 5.3%. Private non-residential spending is down 3.7% year-over-year. Public spending is up 3.4% year-over-year.

This was below consensus expectations; however, spending for the previous two months was revised up slightly.

Markets, AI, & The Great Dumbing

Authored by Matthew Piepenburg via VonGreyerz.gold,

With a NASDAQ and S&P 500 (narrowly driven by seven, mega-cap monopoly powers) enjoying a seemingly immortal ride North, all feels eerily normalized in the land of Wall Street Oz.

Surfing the S&P Wave

An entire generation of wide-eyed investors and a string of clueless policy makers have conditioned themselves (and others) to assume there is no dip that the Fed can’t save, valuation be damned.

In such a seductively sunny backdrop, retail investors are increasingly jettisoning risk management (and risk managers) to passively ride this market wave on ETF-indexed surfboards with very little fear of drowning.

Rocks Beneath the Water?

Meanwhile, a minority of market veterans (Grantham, Buffett, Dalio, etc.) bravely (but in vain?) continue to warn of historical market risk greater in scale than the Nikkei of ’89 or the DOW of ’29 as insiders (Bezos, Zuckerberg, etc) quietly dump billions in private shares in a topping market…

So, whose right or wrong in this bear-bull circus of hidden risks and open optimism?

Are the bears just crying perpetual wolf in a world where the centralization of “once-free markets” by central banks of endless liquidity has outlawed the very laws of stock market gravity?

Madness of Crowds?

For years, the risk-focused bears have been shaking their experienced fingers before what we (and Charles Mackay) have called “the madness of crowds.”

And for the most part, the “madness” has prevailed in one profitable dip-buy after the next—from a global shutdown and historical bank failures to a broken carry trade or an embarrassing liberation day.

In short, nothing seems to shake this S&P, which long ago divorced itself from the mean-reversion warnings of Bob Farrell, the valuation signals of Ben Graham or even the stubborn math of red financial statements and broken balance sheets.

The net result is the most optimistic yet paradoxical (and doomed) market I have ever witnessed.

Margin debt, now greater than anything seen in the pre-GFC or dot.com implosions, has surpassed $1T, as AI-consuming stocks like NVDA, with a market cap of $4T, equal more than 13% of US GDP.

In such current euphoria, boring things like PE ratios, history or even common sense have left the room, and words like “bubble” are literally replaced with the dumbest words of all time, namely: “This time is different.”

Hmmm…

Blindness from Above

Standing upon frothy tops, perhaps it becomes harder to see the lessons of history or the valleys of busted cycles.

Perhaps investors losing oxygen at nose-bleed market levels forget that following the 1929 crisis, markets never sold at 21X earnings again until December of 1997.

Now, such PEs are considered almost “tame.”

Perhaps they also forget that the crashed markets of 1929 did not recover until 1958, just as the crash in 72 only recovered in the mid-90’s or that the great tech bubble of 2000 did not recover its losses until 2011.

And then of course there is the Nikkei of 89, which took over 30 years to regain its lost levels.

But why worry? In the moral-hazard-rich “new normal” of central bank “accommodation” (i.e., currency destruction), every dip is an easy buy, right?

In other words, nothing can stop this new direction in centralized and immortal markets, right?

Wrong.

Will the Fed Save Us?

That classic oxymoron, the Federal Reserve (which is neither “Federal” nor a “reserve”), is no miracle cure.

Regardless of who runs it today or tomorrow, and regardless of its balance sheet and rate tricks, eventually the mechanizations of man can and will bend before the natural laws of supply and demand, debt and currency debasement, and alas, human hubris before karmic implosion.

As for the long list of needles pointing at the US debt and market bubble, any number of foreseeable white swans (spiking rates, a USD out of Fed control, a deep recession) or unforeseeable black swans (wars, assassinations, social unrest, etc.) could bring the madness of these markets and crowds to a sobering and historical uh-oh moment.

The Ignored Needle: AI

But there’s another needle pointing at these mad crowds and madly inflated (and historically unprecedented) markets, which few are willing to see, and it’s currently winning hearts, minds and income statements at equally maddening (and misleading) levels, namely: AI.

The Dumbness of Crowds

Like so many current and past memes of market salvation (from electricity and railroads to dotcoms and mortgage-backed securities), the now omnipresent “AI” wave will eventually (and empirically) drown a large swath of trend-trusters and bubble victims who refuse to see the forest for the trees.

In line with the other oxymorons of late (from the not-so-patriotic Patriot Act to the not-so-genius GENIUS Act), Artificial Intelligence, by its very title, is a comical signal of ignored irony.

To remind: “Artificial” is the antithesis of genuine, and any intelligence that is artificial is inherently the very opposite of intelligence.

Such simplicity, of course, will not dissuade those mega-computing “moderns” (from Sam Altman to Eric Schmidt) who are currently making fortunes on microchips and data-synthesizing “miracle tech” under the banner of “Our Human Future.”

Again with the ironies…

In fact, a deeper dive into the numerous ripple effects of AI suggests there is nothing very “human” behind AI nor anything that “humane” ahead of it.

In other words: When it comes to AI, be careful what you ask for…

First: The Illusion

For anyone glued to their ChatGPT, there’s no denying that AI processes data (both good and bad) incredibly fast. But faster does not mean wiser.

As Antoine de Saint-Exupéry wrote in the 1940s, “Today we can manufacture 10,000 pianos a day, but not any pianists worthy enough to play them.”

In other words, technology often outpaces wisdom, which cannot be augmented by robots or implanted chips.

Wisdom requires time, effort and exposure, not an app.

And once wisdom leaves the room (as we see in nearly every political headline), well… we are all in major trouble.

In a society where actual reading, research and critical thinking (like piano-playing) has already been critically eroded by Google searches and neck-to-iPhone addictions, just imagine the “great dumbing” to come for a newer, faster generation who gets their thinking from ChatGPT rather than, well, actual thinking, research and debate?

Very soon, AI-driven protocols, policies and decisions won’t have to explain themselves at all. Pivotal decisions and “debates” will simply be resolved with: “ChatGPT said so.”

Oh, the horror…the horror…

And no matter how seductive, fast and seemingly dispositive AI-generated conclusions are processed, their outputs are only as good as their inputs.

Diagnostic Robotics, for example, used AI for COVID prognostics, which were impressively fast, but sadly, embarrassingly wrong.

Even DARPA’s Director of AI for detecting IEDs in combat zones confessed that the results were no better than a “coin toss.”

Next: The New, Exciting, Sexy and Life-Altering Bubble

But there’s no denying that AI is new, exciting, sexy and life-altering.

As such, demand for anything touching the AI space (from chips and software to electronic baristas, robotic romance partners and high-school essay cheaters) is skyrocketing.

The $4T market cap at the center of this entirely familiar pattern is, of course, NVDA, whose micro-chip sales are critical to the evolution of this space. Jeremy Grantham describes NVDA as “sellers of shovels in an AI gold rush.”

That is why the other mega-cap tech companies, which keep the S&P precariously afloat alongside NVDA, are buying its microchips to the tune of $200B per year. Once the AI star falls in price, so too will the companies holding the S&P together.

In this race to stay current and ahead of the AI madness, valuation can get cloudy, as names like DeepSeek can arguably do for $6M that which “social visionaries” like Sam Altman will do for $500B.

But hey, why worry about valuation when tomorrow’s prices always seem higher than yesterday’s?

But therein lies the risk.

As in every other prior example of new, exciting, sexy and life-altering bubbles, such as the railroads of the late 19th century or the evolving electricity, automobiles and even internet and dot.com fortunes of the 20th century, there is no denying their extreme impact on our lives.

The AI of the 21st century is undeniably no less of a game-changer than these prior game-changers.

But from a market veteran’s lens, there’s equally no denying that each of these prior game-changing “technologies,” though massively important, were eventually massively over-bought and then, you guessed it: Massively over-sold.

Finally: The Implosion

Over-sold, of course, is just a nicer way of saying, “the market tanked.”

But the real risk behind the current AI hype, bubble and madness (of which the seven stocks leading the S&P are dangerously “all-in”), is not just the pattern recognition of a technology bubble in which fortunes are made before markets are gutted.

In fact, the AI revolution is far more threatening at a broader economic level than just another boom-bust tech cycle.

In the brave new dystopia in which otherwise “speedy and efficient” technology is taking code-writers to Silicon Valley wealth, this unwise yet smart segment of the Orwellian world in which we now live brags about a Starbucks with 100 robots and only 2 employees as “progress.”

The word I’d use is a bit less sexy but a lot more honest: “Deflationary.”

I’ve sat at VC seminars in the US and Europe in which unemployment levels driven by AI alone (from white-collar to blue-collar, Starbucks to UBS) are projected to reach at least 10% within two years.

Here, it’s worth reminding that 5%-6% unemployment rates are traditional tipping points whereby passive investors get clobbered as their index-friendly ETFs turn from friendly to deadly.

10% unemployment would be a true needle to pop the current (mad) market and send 401Ks, as well as the AI-deep “Mag-7” fatally southbound.

And yes, we saw 10% unemployment during the GFC of 2008, and even 15% unemployment during the COVID crisis, which was, of course, supported by trillions in fiscal stimulus, which the US can’t afford today without effectively knee-capping the USD (and sending the gold price further moon-bound).

In other words, AI is more than just another tech bubble cycle; it’s a job-killing technology for which an already debt-driven (rather than GDP-driven) US economy (and S&P) cannot and will not be able to “land softly.”

In summary, if you still think AI is what will save this market and economy, you may wish to think again – or at least ask ChatGPT what it thinks for you…

Tyler Durden Tue, 09/02/2025 - 12:25

Massie Calls For Repeal Of Gun-Free School Zones Act Following Minnesota School Attack

Via American Greatness,

Congressman Thomas Massie (R-KY) has introduced HR 5066 the Safe Students Act which would repeal the Gun-Free School Zones Act of 1990, putting an end to what he calls “the default federal policy of making schools soft targets.”

Massie’s push for repealing the Gun-Free School Zones Act comes on the heels of a high-profile attack against a Catholic school in Minnesota by a deranged gunman who wrote in his manifesto that he targeted the Annunciation Church in Minneapolis, in part, because he believed it  “seems like the kind of school to not arm their teachers.”

My Safe Students Act, HR 5066, would repeal the dangerous Gun-Free School Zones Act of 1990, ending the default federal policy of making schools soft targets.

HR 5066 would make it easier for state governments and school boards to unambiguously set their own firearm policies. pic.twitter.com/K73LMhyEme

— Thomas Massie (@RepThomasMassie) August 29, 2025

Massie said his bill would repeal the federal law put in place by president George H.W. Bush and “make it easier for state governments and school boards to unambiguously set their own firearm policies.”

According to Breitbart, Bush’s 1990 Gun-Free School Zones Act which banned possession of a firearm in a school zone, inadvertently created numerous unarmed “soft targets in place filled with defenseless children, teachers and school staff.”

Historically, mass shooters have sought out venues where the public is forbidden to be armed in order to maximize their opportunity to create as much carnage as possible with minimal risk of being stopped by their intended victims.

In a post on X last week, Massie wrote: “Deranged shooters choose schools because they know their victims are vulnerable. This one even admitted it. There’s never been a shooting like this in a school that allows staff to carry.”

Massie has introduced a bill to repeal the Gun-Free School Zones Act in each session of Congress in which he has served, seeking to equip teachers, staff and other law-abiding citizens with the ability to protect themselves and their students from potential threats.

Gun rights organizations like Gun Owners of America and the National Association for Gun Rights are lauding Massie’s bill and are calling for Congress to abandon the failed federal policy of making schools into soft targets.

Tyler Durden Tue, 09/02/2025 - 11:45

EU Says Von Der Leyen Plane's GPS Was Jammed; Russia Blamed

The GPS of the airplane carrying European Commission President Ursula von der Leyen was jammed while she was en route to Bulgaria on Sunday, an EU spokesperson said on Monday, adding that Russian involvement is suspected.

“We can indeed confirm that there was GPS jamming, but the plane landed safely in Bulgaria. We have received information from the Bulgarian authorities that they suspect that this was due to blatant interference by Russia,” the EU spokesperson said.

As Security Affairs' Pierluigi Paganini reports, Von der Leyen’s jet lost GPS near Plovdiv, forcing a manual landing with analogue maps after circling for an hour. Officials blame Russian interference. Bulgarian authorities reported a surge in GPS jamming and spoofing since 2022, which disrupts aircraft and ground system operations.

“A jet carrying von der Leyen to Plovdiv on Sunday afternoon was deprived of electronic navigational aids while on approach to the city’s airport, in what three officials briefed on the incident said was being treated as a Russian interference operation.” reported The Financial Times.

Bulgarian authorities confirmed the plane’s GPS signals were neutralized, and air traffic control provided alternative landing guidance using terrestrial navigation tools to ensure safety.

“The whole airport area GPS went dark,” said one of the officials.

The European Commission said “threats and intimidation are a regular component of Russia’s hostile actions” and that the incident would reinforce its commitment to “ramp up our defence capabilities and support for Ukraine”.

However, as Moon of Alabama reports, skepticism over Van der Leyen's accusations is warranted: 

Here is what Flightradar was seeing at that time:

Flightradar24 @flightradar24 - 17:16 UTC · Sep 1, 2025

We are seeing media reports of GPS interference affecting the plane carrying Ursula von der Leyen to Plovdiv, Bulgaria. Some reports claim that the aircraft was in a holding pattern for 1 hour.

This is what we can deduce from our data.

* The flight was scheduled to take 1 hour and 48 minutes. It took 1 hour and 57 minutes.

* The aircraft's transponder reported good GPS signal quality from take-off to landing.

Flightradar24 @flightradar24 - 17:50 UTC · Sep 1, 2025

The transponder signal transmitted by the aircraft contains a NIC value.
The NIC value encodes the quality and consistency of navigational data received by the aircraft.
Flightradar24 is using these NIC values to create the GPS jamming map at https://flightradar24.com/data/gps-jamming

The flight with Ursula von der Leyen on board transmitted a good NIC value from take-off to landing.

Āris Cēders @arisceders - 1:14 UTC · Sep 2, 2025

Still, they radioed about the “GPS issue” and requested ILS approach which is significantly less convenient in this particular case.

Flightradar24 @flightradar24 -

"Issue with GPS" can be any technical issue unrelated to GPS jamming. The aircraft was reporting a perfect signal. For sure they were not holding for 1h so the whole story just doesn't make any sense.

Kremlin spokesperson Dmitry Peskov told the FT that "your information is incorrect."

Tyler Durden Tue, 09/02/2025 - 11:25

Trump To Award Former NYC Mayor Rudy Giuliani Highest Civilian Honor

Authored by Aldgra Fredly via The Epoch Times,

President Donald Trump said on Monday that he would honor former New York City Mayor Rudy Giuliani with the Presidential Medal of Freedom, the nation’s highest civilian honor.

Trump announced the award in a Truth Social post, calling Giuliani “the greatest mayor in the history of New York City” and “an equally great American Patriot.”

Details on the time and location of the award ceremony will be announced later, according to the statement.

The Presidential Medal of Freedom is typically awarded to individuals who have made meritorious contributions to U.S. security, national interests, world peace, or other significant public or private endeavors.

Giuliani, elected as New York City mayor in 1993, was once hailed as “America’s Mayor” for his response to the Sept. 11, 2001, attacks, when terrorists crashed planes into the World Trade Center’s Twin Towers and killed nearly 3,000 people.

Giuliani also served as Trump’s attorney in efforts to overturn the results of the 2020 presidential election. He lost his law license last year after a state court found he made false claims about the election.

Trump’s announcement came as Giuliani was recovering from injuries he sustained in a car crash on Aug. 30.

His security chief, Michael Ragusa, said on X that Giuliani’s vehicle was struck from behind at high speed while driving on a highway in New Hampshire.

New Hampshire State Police said that before the car accident, Giuliani and his driver, Theodore Goodman, were traveling southbound on Interstate 93.

While on the road, they were flagged down by a woman who said she had been involved in a domestic violence incident. Giuliani called 911, and they remained on the scene until troopers arrived.

Giuliani and Goodman then traveled northbound on Interstate 93 before their vehicle was struck from behind, prompting troopers already at the initial scene to respond immediately. Police said that no charges have been filed so far, and the crash is still being investigated.

“Investigators believe the driver who struck Goodman and Giuliani had no connection to the initial domestic violence incident,” New Hampshire State Police said in a statement. “At this time, all aspects of the crash remain under investigation, including whether distraction or curiosity of the initial scene was a factor.”

Ragusa said that Giuliani was taken to a nearby trauma center, where he was diagnosed with “a fractured thoracic vertebrae, multiple lacerations and contusions, as well as injuries to his left arm and lower leg.”

Despite these injuries, Ragusa said the former mayor is in “good spirits and recovering tremendously.” He said that the accident was “not a targeted attack” against the politician.

“We ask everyone to respect Mayor Giuliani’s privacy and recovery, and refrain from spreading unfounded conspiracy theories,” he added.

The Epoch Times reached out to Ragusa for further comment but did not receive a response by publication time.

Tyler Durden Tue, 09/02/2025 - 11:05

US Manufacturing Surveys Surged In August As New Orders Jumped

After tumbling in July, expectations for August's US Manufacturing surveys were optimistic (with both ISM and S&P Global both expected to tick higher, though the former expected to remain in contraction).

• S&P Global's US Manufacturing PMI rose dramatically from 49.8 in July to 53.0 in August (down very marginally from its preliminary print of 53.3) - the strongest in over three years

• ISM's US Manufacturing PMI rose from 48.0 in July to 48.7 in August (below the 49.0 expected)

And both of these increases in 'soft' survey data come as hard data has disappointed...

Source: Bloomberg

Under the hood of the ISM data, we see prices falling significantly, nmew orders jumping, but employment remaining significantly weaker (as we suggested will happen)...

Source: Bloomberg

“Purchasing managers reported that the US manufacturing was running hot over the summer," according to Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

“The past three months have seen the strongest expansion of production since the first half of 2022, with the upturn gathering pace in August amid rising sales. Hiring also picked up again in August as factories took on more staff to meet an influx of new orders and an accumulation of uncompleted work for waiting customers."

“The manufacturing sector is therefore on course to provide a boost to the US economy in the third quarter.

But inflationary fears loom...

“The upturn is in part being fueled by inventory building, with factories reporting a further jump in warehouse holdings in August due to concerns over future price rises and potential supply constraints. These concerns are being stoked by uncertainty over the impact of tariffs, fears which were underpinned by a further jump in prices paid for inputs by factories, linked overwhelmingly by purchasing managers to these tariffs.

“Cost increases are being passed on to customers via widespread hikes to factory gate prices. The big question is the degree to which these price rises will then feed through to higher consumer price inflation in the coming months.”

So S&P Global sees prices higher and hiring improving while ISM sees prices falling and employment still badly lagging... take your pick!!

Tyler Durden Tue, 09/02/2025 - 10:06

(Posted with permission). The ISM manufacturing index indicated contraction. The PMI® was at 48.7% in August, up from 48.0% in July. The employment index was at 43.8%, up from 43.4% the previous month, and the new orders index was at 51.4%, up from 47.1%.

From ISM: MManufacturing PMI® at 48.7% August 2025 ISM® Manufacturing PMI® Report

Economic activity in the manufacturing sector contracted in August for the sixth consecutive month, following a two-month expansion preceded by 26 straight months of contraction, say the nation's supply executives in the latest ISM® Manufacturing PMI® Report.

The report was issued today by Susan Spence, MBA, Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee.

“The Manufacturing PMI® registered 48.7 percent in August, a 0.7-percentage point increase compared to the 48 percent recorded in July. The overall economy continued in expansion for the 64th month after one month of contraction in April 2020. (A Manufacturing PMI® above 42.3 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index indicated growth in August following a six-month period of contraction; the figure of 51.4 percent is 4.3 percentage points higher than the 47.1 percent recorded in July. The August reading of the Production Index (47.8 percent) is 3.6 percentage points lower than July’s figure of 51.4 percent. The Prices Index remained in expansion (or ‘increasing’) territory, registering 63.7 percent, down 1.1 percentage points compared to the reading of 64.8 percent reported in July. The Backlog of Orders Index registered 44.7 percent, down 2.1 percentage points compared to the 46.8 percent recorded in July. The Employment Index registered 43.8 percent, up 0.4 percentage point from July’s figure of 43.4 percent.
emphasis added

This suggests manufacturing contracted in August.  This was at the consensus forecast, although employment was weak and prices very strong.

The post The Power of Trump’s New India-China Alliance appeared first on CEPR.

Violence Is Back As A Tool Of National Policy

By Benjamin Picton, senior market strategist at Rabobank

Flying Blind

News broke yesterday that a jet carrying European Commission president Ursula von der Leyen had to land using paper charts after its GPS navigation systems were apparently jammed by Russia. Traveling to Plovdiv in Bulgaria, VDL’s jet apparently circled for an hour before the pilot took the decision to do things the old-fashioned way and consult the map.

Such an incident targeting a head of not-quite-a-state is shocking to say the least, but serves as a neat metaphor for relations between Russia and Europe in recent years (decades?): European liberal internationalists assume old norms apply -> Russia disagrees and demonstrates that it views violence as a legitimate tool of national policy -> Europeans left stunned.

Some will remember the images of German diplomats guffawing at the United Nations in 2018 as Donald Trump admonished Germany for placing itself at the mercy of Russia for its energy supplies. Fast-forward to 2022 and suddenly Trump’s speech wasn’t so funny, and anyone who cares to bring up a chart of German industrial production can see the fruits of the lack of imagination of Germany’s leaders. Germany’s factories are now struggling to replace lost production for civilian applications with new production for military applications. But how to do this without cheap energy?

So, yes, violence is back as a tool of national policy. Russia is unapologetic about this. So is Israel. So is the United States if you consider the decisiveness of using B-21 bombers to drop bunker busters on Iranian nuclear facilities. Hamas and the Houthis are certainly unapologetic and China has also been stepping up the frequency and scale of ‘rehearsals’ for the invasion of Taiwan while the Chinese navy and coast guard have had semi-regular clashes with the Philippines over territories that China claims as its own through the ten-dash line. Those Chinese territorial claims are not supported by the United Nations Convention on the Law of the Sea, but that is really part of the point.

Despite being permanent members of the UN Security Council, China and Russia have never really fully subscribed to the legitimacy of the post-war global architecture. Many Western leaders continue genuflect to the ‘rules-based international order’ as if it was chiselled in stone and handed down from Mount Sinai. In reality, that rules-based order has always been a US-led order, upheld by US force of arms, and has always been viewed by China and Russia as such. Russia has demonstrated that the it is quite willing to flout the ‘rules’ when its national interest demands it. This does not mean that war is inevitable, but it does mean that it is a policy option that other countries need to dissuade revisionist powers from using. As Bismarck reputedly said “do I want war? Of course not! I want victory.”

Both the United States and China are now interested in re-writing the rules of the road to suit their own interests. The US now sees the liberal economic order as a threat to its position as global hegemon while China seeks to push the US out and establish itself as an Asian hegemon. In the view of the United States, a persistently overvalued dollar and unequal trade terms has offshored production from the US into China (and elsewhere) while the US got hooked on the drug of artificially high living standards courtesy of the strong dollar and the subsidized production of consumer goods in China.

As Scott Bessent explained to Fox News last week, the United States got a major wakeup call during Covid when it became apparent that many of the things that the United States needed (pharmaceuticals, personal protective equipment etc) were not made in the USA and could not be easily imported while global shipping was snarled up and the countries who DID produce the goods and own the ships were focusing on supplying themselves. Consequently, the US now cares about controlling supply chains for strategic goods, is using state-intervention to guide production and is increasingly autarchic. This is seen as a national security priority in the context of geopolitical competition with China. Everything must be understood through this prism.

A logical corollary of the MAGA program seeking to re-orient the US economy from being characterised by consumption to being characterised more by production (as it was at the end of WWII) is that there will have to be less consuming going on. The question then becomes which segments of society are going to see their consumption power curtailed? Trump and Bessent say the people at the top have had it too good for too long and will have to pay, while the losers from 40 years of globalization (those at the bottom of the income distribution) will see their living standards safeguarded.

China, as the main power of the emerging BRICS bloc, is seeking partners in a new multilateralism aimed at replacing the US-led order with something that better suits the interests and ambitions of China and its partners. The events of the Shanghai Cooperation Organisation summit over the weekend demonstrate that Russia, Iran and Belarus are on board. India and Brazil (not an SCO member) seemingly are too, but there are problems.

Firstly, many of these countries have had territorial skirmishes in the recent past (e.g. the Sino-Soviet war in the 1960s and China-India border skirmishes more recently). Secondly, it is not immediately apparent how these powers could be incorporated into a new economic and financial architecture. The trade flows need to net and somebody needs to play the role of deficit runner if they are going to provide a replacement for the US Dollar as reserve currency. Nobody wants to do this because everybody wants to produce and export.

Additionally, the Chinese conception of world order historically posits the Chinese emperor as the intermediary between earth and heaven. That is to say, China has the ‘mandate of heaven’ that legitimises Chinese hegemony, and delegitimises the claims of anyone else to be on equal footing with China. How does India’s ambition for a multipolar Asia fit into this conception of world order? How does Iran’s conception of itself as a central Asian hegemon fit this view? How does Russia’s view of itself as a top-tier Eurasian power fit? The answer is: they don’t.

The UK Telegraph today claims ‘China unveils plan for new world order’. However, while team BRICS appears united in grievance against the US order, it is not yet clear that they are offering a coherent alternative. Xi Jinping made his pitch to the global south by encouraging them to embrace “free trade” and announcing that the Shanghai Cooperation Organisation would establish a new development bank to build influence in Eurasia by providing infrastructure loans for green industry. Establishing development banks extending loans in (presumably) Renminbi has the added benefit of de-risking the emerging bloc of the extraterritorial power of the US Dollar. Xi also said he would open up China’s BeiDou satellite system to SCO members as an alternative to the US GPS system (perhaps Ursula von der Leyen will be tempted?).

While the BRICS bloc coalesces towards a new conception of world order and seeks an economic and financial architecture to support it, Western powers seem unsure about the direction of their own political economy. Europe wants to be green but it also wants to re-arm, and the two are not compatible. Far right parties now hold polling leads in Germany, France and the UK as popular discontent at ‘the way things are going’ continues to rise.

European style anti-immigration protests recently broke out in Australia where a Canada style net inward migration rate of ~1.7% at a time where the country can’t house its own young is testing the social fabric. Recent comments by an Indian Minister suggesting that he was “in deep negotiations with my counterpart in Australia to create 1 million homes” using Indian labour trained in Australia and funding from the UAE is sure to add fuel to the fire. The supposed plan has not been corroborated by Canberra, but could be the most sensational economic chicanery since the Khemlani loans affair if it turned out to be true.

Whether fact or fiction, the plan does highlight an important point: for economies like Australia that have labor markets at ‘full-employment’, there is simply no surplus labour to do important stuff that needs doing. Labor is a factor of production subject to scarcity, and when scarcity strikes governments take on responsibility for directing the factors of production into their most useful employment. The United States is now doing this through ‘state capitalism’ and cherry-picking high value-add industries for its own economy.

This dynamic poses a question. Is Australia best served by having 55% of school leavers attend university to add to the oversupply of law graduates carrying unserviceable student loan debts? Or would it make more sense to direct the youth into trades training to address the undersupply of builders, tilers, plasterers, welders, farm workers etc etc? These are the trade-offs of economic policymaking under real constraints, but the Australian trade minister recently implied that a more active approach to organising production would not be taken when he said that Australia could be an example to the world by abolishing 500 “nuisance” tariffs.

So, the US is taking a more active role in directing economic activity, the BRICS are seeking to reshape the world order in their own image and Europe is searching for a new model of political economy that simultaneously delivers growth, security and social cohesion. Australia, meanwhile, wants to be an example to the rest of the world by evangelising an economic model that others are rejecting as failed. In this fractious new global environment leaving decisions of what gets produced, where, and by who completely in the hands of Mr Market really would be flying blind.

Tyler Durden Tue, 09/02/2025 - 09:45

 

 

The transcript from this week’s, MiB: Mark Zandi, chief economist of Moody’s Analytics, is below.

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

~~~

This is Masters in business with Barry Ritholtz on Bloomberg Radio

Barry Ritholtz: This week on the podcast. Wow. What a fascinating conversation with a really interesting, intelligent guy. Mark Zandi has been the chief economist of Moody’s Analytics for 20 years. He co-founded a regional analytics shop in the nineties coming out of both Wharton and University of Pennsylvania, where he got his undergraduate and graduate degrees in economics. He buys economy.com in the late nineties and builds out that really a fascinating career, unique insight. You know, we live in a highly polarized, partisan world, whether it’s the fed inflation labor, BLS, the economy. I love speaking to somebody who was an advisor to both the McCain campaign and the Obama White House. He just looks at the world through a set of lenses that are data driven, model driven, and tries to provide the best analysis as to what’s going on where and why. I thought this conversation was great, and I think you will also, with no further ado, moody Analytics Chief Economist, mark Zandy. Let’s just start with your background. You get a bachelor’s from Wharton, a doctorate in economics from the University of Pennsylvania. What was the original career plan?

Mark Zandi: I had no career plan. None. None. No. Never thought about going into markets

Barry Ritholtz: Economics? Like a PhD in economics. Were you thinking academia or just…?

Mark Zandi: Well, I definitely knew, not academia. My father was a professor at Penn. At Penn, and that’s why we all went to Penn because, you know,

Barry Ritholtz: Discounted tuition at that time, which is a long time ago, you’re gonna Tell me it was free?

Mark Zandi: It was free. (Wow). Tax free.( Wow). Tax free. And you know, I have four siblings. (Wow). In fact, he actually, he was pretty smart guy. He bought a Red Stone at 42nd and Spruce, you know, just off campus. And we all lived in that, in that Red Stone.

Barry Ritholtz: Amazing. (Yeah). All right. You come out of college and grad school with a deep background in economics. What inspired you to explore a career in economics?

Mark Zandi: Well, my work was very empirical. My thesis advisor was the guy named Larry Klein. He was a Nobel laureate. Yes. He got it as a result of all the work he did, building macro models, us macro models, and I, I needed to make money when I was in school, so I worked part-time. Hi. His firm is called Wharton Econometrics, you know, after the Wharton School worked

Barry Ritholtz: There, hold on a sec. The school let him set up a program called Wharton Econometrics. A company, a separate company. Yeah. Apart from the school. Yeah, that’s what I’m asking.

Mark Zandi: Yeah. Yeah. I don’t know. I’m sure there was some kind of financial arrangement that he must have paid some kind of royalty or something to, but I’m, I’m not sure, you know, but they, they,

Barry Ritholtz:  I don’t think you could get away with even paying royalties today. You couldn’t set up MIT economics or Stanford econometrics? No, you

Mark Zandi: Don’t think so.

Barry Ritholtz: Yeah. I mean, if you do certain research right, and you get a patent Right, they get a piece of it. Right. But setting up a, like, there is such a branding Right. Focus these days. I, I can’t imagine a big school would let you do that?

Mark Zandi: Do that unless you played a really big royalty, I assume. Right. But, yeah. But anyway, so that was a firm, a business economic forecasting business. And so I learned the business as a graduate student, you know, working there to earn money. And I, I also used their main, they at that time was a mainframe. Everyone was on, there was no pc. It was the main, this was 80.

Barry Ritholtz:  Was it still the punch cards?

Mark Zandi: Punch Cards for train.  You wanted to change the federal funds rate by 25 bips. You’d punch a card, you have a stack of cards, you would take it down to some guy who would put it into the mainframe,

Barry Ritholtz: Takes 12 hours for three minutes. Oh, it take 12

Mark Zandi: And if you messed up, if you hit the wrong, you know, button, then you had to wait another 12 hours to get the answer. Well, how, how much was a quarter appointed increase in the funds rate, gonna do damage to the economy? That kind of thing.

Barry Ritholtz: What was, what was your doctoral thesis on?

Mark Zandi: It was regional economics. It was examining fancy word factor flow, so labor capital and the movement between regions in the country. And that was the basis for the firm. I started in 1990, called Regional Financial Associates. Because at that time,

Barry Ritholtz: So you started your own firm, right? Pretty much right outta school?

Mark Zandi: Pretty much right outta school. Wow. Yeah, with my brother and my best friend. My best friend was also working, he was in the graduate program at Penn, and we were working at Wharton together. We could see there was a lot of problems, you know, with the way it was being run. It was mainframe oriented, and the PC was just coming out. So we were able to use the PC to do the things that we needed to do.

Barry Ritholtz: I remember in grad school using this pokey Mac Classic in 1988.

Mark Zandi: Oh, the Mac, really?

Barry Ritholtz: And the technology was just, Ooh, look how advanced this was. Bear skins and stone knives. Yeah. That’s what it, it reminds me of. Well,

Mark Zandi: We bought IBM’s at the time.

Barry Ritholtz: Yeah. So, so you, you launched this, when does economy.com come along to regional economics?

Mark Zandi: Almost a decade later.

Barry Ritholtz: Late nineties. The internet boom really took off, what, 98 99? 2000, 2001.

Mark Zandi: Yeah. It’s like two years after the irrational, exuberant speech. Yeah. Is when it really became irrational. Exuberant. That was what, 96?

Barry Ritholtz: yeah. Late 96. Yeah.

Mark Zandi: Greenspan speech. In fact, we bought the uur l economy.com, this guy from Quest, he was an executive at Quest, remember Quest? Sure, of course. Yeah. Yeah. One of the baby bells that was spun out of at TA headquartered in Denver, I believe.

Barry Ritholtz: Colorado.

Mark Zandi: It was Colorado. Right. And he made, he squatted on all these names. In fact, when we were negotiating the price for that buying economy.com, he was on a yacht somewhere in the South Pacific. He had made so much money on squatting

Barry Ritholtz: So what did you end up paying for economy.com

Mark Zandi: At the time? It was a lot of money. 250 K. Yeah.

Barry Ritholtz:  That is a, and, and you a hundred Xed it eventually. Yeah.

Mark Zandi: It certainly was a good investment,

Barry Ritholtz: To say the very least. Yeah. I know your thesis advisor was, you mentioned Lawrence Klein and Nobel Laureate. Was he an advisor to the firm when you were, when you were first building that out?

Mark Zandi: No, I thought that he was older at that point, and he was, and actually we were competitor now, right? To Wharton. Oh, Whitney Econometrics. I don’t think so. I mean, we weren’t really  doing, we were a bunch of guys. Right, right. Yeah. And we got the economy.com. I’m making this up, but we might have had 40, 50 employees, something like that, so.

Barry Ritholtz: Oh, really? So, so what was it like building out what essentially became a.com in the late nineties?

Mark Zandi: Oh, it was a lot. It was so much fun. I mean, I’ve been a startup. I’ve been a small business guy, and I’ve been part, now obviously part of Moody’s, a large multinational. So I’ve seen business from a lot of different angles. And I’ll have to tell you maybe, ’cause I was just young. I mean, I loved being a startup. It was just,

Barry Ritholtz: It’s a lot of fun, especially if it’s working.

Mark Zandi: I can imagine. And we got lucky, you know, the, the interstate banking happened. So all these banks needed to think about their footprint outside of their state. So they needed our, the data and information that we were providing. So if I were a bank in Connecticut and I was thinking about moving into Massachusetts, I now needed to understand the Massachusetts economy. And we would help, you know, Seanette Bank was Connecticut, Connecticut Bank. That was one of our first clients back in the day.

Barry Ritholtz: So how you, you built this out in the late nineties. You survived a.com implosion, because although you were technically a.com, you weren’t a frivolous clicks and eyeball sort of company. It was a real company with real clients and real revenue. Right. Kind of set you apart from Yeah. The pets.com of the world.

Mark Zandi: Well, we were an economic forecasting firm masquerading as a.com. Right. Because we, you know, it was@thattime.com, your valuations were a lot higher. And Sure, of course it was practically speaking, we set up economy.com. Right. That was our, when you came to our site, you came to economy.com. So it was a way to advertise where you go to get our information. So,

Barry Ritholtz:  And today you go to economy.com and it forwards you to Moody’s.

Mark Zandi: It does, yeah. How

Barry Ritholtz: Did the relationship with Moody’s come about five, six years later?

Mark Zandi: The CEO of Moody’s Analytics was this fellow Mark Almeida great guy. He was a Philly boy, a Philly guy. He, he, and he and I worked together at Wharton Econometrics, which is Philly based ’cause of Klein and I, he was a data guy. He was in a cube next to me. I was in his young economist working on models and data and forecasting. He was a data person, and so we knew each other quite well. And he went on to Moody’s at that time, was the rating agency. And he did extraordinarily well, became the CEO of Moody’s Analytics when they formed Moody’s Analytics. And he just knocked on the door and said, Hey, are you interested in selling? And the answer was no. ’cause we had no idea what it was worth. Just serendipity. Fitch knocked on the door at roughly the same time within a week or two. I don’t, I can’t connect the dots. Exactly.

Barry Ritholtz: A bidding war. right?

Mark Zandi: Yeah, exactly. So we were able to get a price. Right, right. And I do remember him saying to me, Hey, mark, what price would it take for us to end this, this negotiation? And to this day, I gave, he, I gave him a price. He, and he said he took it right away. And I go, too, little, too low.

Ritholtz: Well, if you Google it, it says $27 million. Yeah, yeah. But I have no idea how accurate that is. Yeah. E everything that I find through AI and search, I always seems to have a little asterisk with it. You don’t, you don’t know what’s especially private, stuff like that. So, Moody’s Analytics is a division of Moody’s, the big rating company. It’s, it’s a, a group within, is that right?

Mark Zandi: Yeah, it’s, there’s Moody’s, the rating agency, and then Moody’s Analytics. More recently they’ve been, we’ve been moving together, but it’s still, I’m still in the entity. Moody’s Analytics.

Barry Ritholtz: So what was it like going from a startup to a large multinational con?

Mark Zandi: I can tell you it was great because we were allowed to remain independent in every respect, except for some of the back office kind of things that legal, hr,hr,

Barry Ritholtz: Which no one wants to do anyway.

Mark Zandi: Yeah. Sales. And that’s the key reason why we sold, was because we were mostly us and we were trying to go global. And that’s hard. It’s very expensive. We set up an office in London and Sydney and it was difficult.

Barry Ritholtz: And they have a giant client base with,

Mark Zandi: Oh, they’re everywhere.

Barry Ritholtz: Clients all over the world. Yeah. That has to be a huge benefit to Oh yeah. A small startup. It allows you to really supersize

Mark Zandi:  And a Salesforce all over the world. Right. And, you know, Moody’s a respected institution, but overseas it’s highly respected if you go into many emerging markets. Right. Rating debt, sovereign debt is really, really critical. And so when a Moody’s or an s and p says something, it really does move markets. And, and so it helped us raise our credibility. We had no credibility overseas and this allowed us to gain some credibility overseas

Barry Ritholtz: Right away. Yeah. Speaking about gaining credibility in 2005, you wrote a piece, where are the regulators, the runaway housing market needs tougher regulatory oversight, very prescient analysis warning about, Hey, you can’t just give mortgages to people regardless of their ability to actually service that debt. What drove that analysis? That was really the first time I became aware of you as an economist.

Mark Zandi: Yeah, I remember that piece. I’m a macro guy, but my area of expertise is housing and housing finance. I was watching the housing and mortgage finance markets very carefully at

Barry Ritholtz: The time, which a lot of Wall Street didn’t really seem to be paying much attention

Mark Zandi:  No, no, no.

Barry Ritholtz: My mom was a real estate agent. That’s the only reason why is that? Right? I was paying attention to this space. And that’s probably how I found you. ’cause we were having regular conversations.

Mark Zandi:  So interesting. Yeah. And you, so regional financial associates, banks, regions, you know, obviously it’s real estate and housing are kind of top of mind. They write a lot of mortgages. Yeah. They make HELOC loans and other things against it.

Barry Ritholtz: And they were losing market share to these unregulated non-bank lenders, the private label securities market market.

Mark Zandi:  Yeah. And of course, and the regulators were my client. So the FDIC for many, many years was my largest client by far and away. Wow. Yeah. So I, you know, I was looking at this space from the prism of housing, housing, finance, and also from a regulatory perspective. And I could see this was, you know, a problem.

Barry Ritholtz: So something was totally, totally a afoot.

Mark Zandi: I did have one, I’ve had, I had a number of periods of doubt in that, in that lead up to the crisis. One was the Fed under Greenspan asked me to come in and brief them on housing. ’cause I, I was a housing guy and I give this talk and it was pretty dark. And at the end of it saying that we’re gonna have a problem, I didn’t think we were gonna have a problem to the degree we had the problem. But I knew there was a problem coming. That was the message of the talk. And when I finished, I didn’t get a single question from one fed member.

Barry Ritholtz:Really? Not one.

Mark Zandi:  So there was this just a pro se discussion, or I, I was confused stu them into silence. I was totally confused by the whole thing. , there was a guy, ed Gramlich, who was of course, do you remember him? And

Barry Ritholtz: Sure. A hundred percent. He was kind of a naysayer.

Mark Zandi: Very much so. Yeah. He was in the camp of, Hey, you know, you have to be able to, the the history of finance Yeah. Is not based on the Securtizers ability to sell their product. It’s based on the borrower’s ability to service the loan. If you take that step out, you’re asking for trouble.

Barry Ritholtz:  He very famously was the fly in the ointment and also very Right. Passed away before everything blew up

Mark Zandi: Yeah, that’s right. That’s right. But he even, he didn’t say anything. So I walk out of that meeting and I’m going, ah, I’m, I’m, maybe I have this all wrong. So points in time. I had my doubt. But it became clear by 2006

Barry Ritholtz:. So, so after the crisis in 08, 09 or eventually post financial crisis, you become an informal policy advisor to the Obama administration. Tell us how that came about outside nonpartisan economic advisor.

Mark Zandi: Well, that was the time when the administration was trying to figure out, how do I respond. Obama administration had just come the crisis that occurred September oh eight, he was in office by January of oh nine. They used that period to try to figure out how do I respond to this mess? What do I do? You know, both from a coming a fiscal policy perspective. From a regulatory perspective, from all angles. And I had done a lot of work on estimating so-called multipliers of different policies. So if you do this, you know, what is the impact on the economy if you do that, what is the impact on the economy? Now that’s widespread, that kind of work. Lots of people do that work, do it much better than I do. But at the time, there, there just really wasn’t anyone looking at it that way. And trying to estimate those multipliers. So they used those multipliers in trying to design the response, the, the, the stimulus, so-called stimulus package that they put in place in, in January 20th, 2000, in 2009,

00:15:23 [Speaker Changed] Arguably knowing near large enough to drive a recovery in the economy quickly.

00:15:30 [Speaker Changed] Well, yeah. And I, I think that’s the lesson that the, the Biden administration took coming outta the pandemic. Right.

00:15:35 [Speaker Changed] Even the Trump administration, the First CARES Act. Yeah. The first two CARES Act. Were under President Trump. Right.

00:15:40 [Speaker Changed] Biden gets into office March of 2021. 2021, he passes a, the American Recovery Act, $2 trillion in, you know, obviously it was very large, a lot of criticism. Even Larry Summers was all over it saying it’s too large. Right. But I think the Biden administration was looking back at the Obama administration and saying, Hey, look, the Obama administration was, we, we will come up with this package and if we need more, we’ll get it. They never got it. So the economy struggled for 10 years after the financial crisis. Right. And so the Biden administration saw that, and they said, Hey, we probably should go for a bigger bite of the Apple because we may not get another bite, and therefore let’s go for a bigger

00:16:15 [Speaker Changed] Package. Right. And that was over the next 10 years. And that came into the environment where the first CARES act under President Trump was the largest fiscal stimulus since World War ii, at least as a percentage of GDP. Then there was the CARES Act two under Trump, and then a whole bunch of,

00:16:35 [Speaker Changed] I think at CARES Act three. And then you come in with Biden. So if you tell Cares

00:16:38 [Speaker Changed] Act three was Biden, which was short term and drop, but all, most of the other legislation under Biden was on, was over 10. The infrastructure bill. Yeah. The, the Inflation Reduction Act, those are all 10 year legislation. So it feels very much like the 2010s was the era of monetary stimulus. And the 2020s seems to be the era of fiscal

00:17:02 [Speaker Changed] Stimulus. You know, I hadn’t thought of it that way, Barry, but that’s a really good way of putting it. Yeah, exactly. I mean, the Fed had to work really hard back in the 2010s. ’cause they weren’t getting any support from fiscal policy. That was government shutdowns. That’s right. The treasury debt limit battles fiscal policy was contractionary. And so the Fed had to step in and provide a lot of support. And this

00:17:19 [Speaker Changed] Go around. Right. The Congress did not, you know, they seemed to have forgotten everything we had learned from Keynes. Yeah. And they remembered it in 2020. It, it’s kind of amazing. ’cause I recall being at a dinner with a number of people, including some Nobel Laureates in economics. And when I said, oh, I think they’re trying to cause a recession Congress, they are, they know how this works. They’re just, you know, they, they want to submarine this administration. It was very much poo-pooed by the people there. And then eventually it’s like, oh, this has become much more partisan. And I, I wasn’t making a partisan argument. It was just an observation. Hey, we know how this works. We’ve done giant fiscal stimulus, whether it’s tax cuts or spending, we know what the impact is refusing to do it. I can’t come up with an, a better explanation other than we want to tank the economy and

00:18:13 [Speaker Changed] Get this guy out. Well, the explanation of face value was of course, deficits in debt. Right. We wanna reign that in.

00:18:19 [Speaker Changed] Right. Except for giant tax cuts and big spending. O other than that, you know, it’s, everybody is a deficit hawk when they don’t control the White House. That’s a great point. And it’s, it doesn’t matter if you’re Republican or a Democrat, when your guy loses, suddenly the debt matters. Yeah. And it’s been going on my entire adult life. It’s so transparently

00:18:40 [Speaker Changed] Political.

00:18:40 [Speaker Changed] And that’s where, where,

00:18:41 [Speaker Changed] Where, where we are on the deficit debt.

00:18:43 [Speaker Changed] For sure. So I wanted to ask about your relationship with John McCain. Yeah. ’cause I, I find this both fascinating and hilarious. Yeah.

00:18:51 [Speaker Changed] Yeah. Well, perhaps it equally as interesting. My friend Kevin Hassett asked me to come help out the McCain campaign. You know, now Kevin is the head of the National Economic Council and Donald Trump, he was at a EI, the American Enterprise Institute at the time

00:19:06 [Speaker Changed] And name consistently floated for potential figure roles. Yeah.

00:19:12 [Speaker Changed] And this is well before Obama came on the scene. I didn’t know President Obama at all, and I knew McCain and I, I admired him mostly around foreign policy. That’s obviously where his expertise was. But I also felt like he, they needed real help. The campaign needed real help on economics. And I was the guy who took all the incoming information about the economy and translating that into what does it mean for the economic activity and what, how should we, the campaign respond to that. Well, I wasn’t paid, I wasn’t officially part of the campaign, but that’s the kind of support I provided. But, you know, obviously when the crisis hit Senator McCain, that wasn’t his strong suit. Right. Again, he was foreign policy. He wasn’t economics. He kind of struggled across the finish line and never really grabbed on, I I can recall briefing the campaign saying, we got a real problem here. This is a, this is gonna be a mess. And there was, you know, complete kind of, no, there’s not. It’ll be, everything will be okay. And so there was a little bit of tension at the end of that campaign. It

00:20:13 [Speaker Changed] Feels like he just encountered some unfortunate timing because between the war in Iraq and the crisis, I think the Bush administration had made any mainstream Republican unelectable in 2008. And the Democrats put up a charismatic guy. Yeah. I don’t think McCain would’ve been anything but a really good president. Right. And in any other year, a really strong candidate. Right. Kind of shocking the way this plays out. Yeah. But you are often painted as this. Oh, that’s, Andy is a lib. Like he was a, a, an advisor to both McCain and Obama. That’s more of someone trying to serve his country, not a partisan.

00:20:58 [Speaker Changed] I have always provided advice when asked from both sides of the aisle. So, you know, sometimes more from the D side at times more from the R side. But I’ve done both. Clearly the political center of gravity has shifted here. And McCain, even McCain, I’m not sure where that kind of lines up in the political spectrum. But yeah, I’ve always been non-partisan. I tried my very best to be non-partisan. And even now it’s, it’s tough to talk about the economy as an economist in the, given all of the things that are going on with economic policy, tariffs and immigration and doge, generally when I address a group, I start saying, I, you know, I know I’m gonna sound political. I don’t mean to be political. I’m doing my very best not to be political, so please forgive me. And that generally people take that in and, you know, forgive me if I overstep in some way in their

00:21:45 [Speaker Changed] Mind. It, it’s tough to be an honest criticizer of policy without people. I, it’s kind of a lazy accusation to say, Jacques, this is partisan. Well, no, we could talk about tariffs. We, we tried ’em in 1930, didn’t work out great. Why do we think it’s gonna work out well this time? Right. That’s not partisan. That’s just, that’s the factual situation. That’s right. If you wanna make a, an argument for why a consumption tax on consumers of imported goods is an efficient, effective way to either lower the deficit or raise capital or realign global trade, have at it. But understand there’s a body of of history that informs us what happened the last time

00:22:32 [Speaker Changed] We talked. Totally. It’s so interesting because on almost every issue, economists debate and the debate is reasonable. Right. Economists,

00:22:40 [Speaker Changed] Reasonable people can disagree.

00:22:42 [Speaker Changed] Oh, yeah. And economists think about the second, third, fourth, fifth order effects of these things and how they platter of time. So it’s very not at all unusual to have these knockout drag down fights between economists over issues, but on tariffs, broad-based tariffs. It’s not much of a debate.

00:23:00 [Speaker Changed] Right. There’s a pretty big consensus. Right. Hey, the world isn’t flat. We, we figured this

00:23:05 [Speaker Changed] Out a already. Yeah. Yeah. So, so I feel like I’m on pretty sound ground when I say I’m not a fan of these broad-based tariffs.

00:23:11 [Speaker Changed] The phrase that always comes up with me on these sort of things, these accusations of partisanship, is the Overton window. You could be middle of the road or, you know, maybe center left or center Right. But when the entire framework shifts far to one way or another, it suddenly looks like you’re an outlier, even though you were kind of centrist. It’s

00:23:34 [Speaker Changed] Kind of how I feel. Yeah.

00:23:35 [Speaker Changed] Right. The wings have, have expanded and suddenly what, what seems like it’s pretty middle of the road. I isn’t any, any longer coming up. We continue our conversation with Mark Zai, chief economist of Moody’s Analytics, discussing what the firm is focusing on in the 2020s. I’m Barry Riol. You’re listening to Masters in Business on Bloomberg Radio. I am Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Mark Zandy. He’s chief economist of Moody’s Analytics. Previously he co-founded economy.com and hosts the Inside Economics Podcast.

00:24:23 [Speaker Changed] I bet you say that to all the economists.

00:24:24 [Speaker Changed] Everybody is my extra special guest. I get, get grief about it because once I painted myself into that corner, Hey, my ordinary guest is this bum. Let’s talk about your Moody’s experience. We talked earlier about, you know, your warnings on housing and, and home financing. And what ended up happening with subprime securitization. Moody’s was one of the biggest rating agencies. I criticized them in Bailout Nation. Tell us what it was like when you joined the firm in oh five, and you are wagging a finger about these sort of things. Did you get any sort of pushback? What, what was it like stepping into a firm that indirectly was a focus of, of some of your analytical critiques?

00:25:12 [Speaker Changed] Yeah, I got pushback. You did? I did. Yeah. I mean, I, I wrote a paper on the subprime mortgage space and did everything but say, you know, these securities should be downgraded, house price declines, credit risk, defaults, foreclosure, these are the losses. But I didn’t take it the next step and say, okay, what does this mean for ratings? But I wrote that paper and it went to the CEOA great guy and the C-E-O-C-C-E-O

00:25:38 [Speaker Changed] Of analytics or the CEO EO of Moody’s. No, Moody’s. Full

00:25:41 [Speaker Changed] And full Moody’s.

00:25:42 [Speaker Changed] Right.

00:25:43 [Speaker Changed] And this, of course, I just had sold my company to them. So this is all brand new. He didn’t, who, who is this guy?

00:25:49 [Speaker Changed] What’s

00:25:50 [Speaker Changed] His, what’s he doing xy Andy. What? That’s 00:25:52 [Speaker Changed] The back of the alphabet. We never get to his stuff.

00:25:54 [Speaker Changed] Yeah. He goes and he goes, why is he talking about subprime mortgage? What does that have to do about the economy? And at the time, that was a reasonable question. The best thing that ever happened. Yeah. Bernanke gave a speech called

00:26:05 [Speaker Changed] Contained

00:26:06 [Speaker Changed] Subprime mortgage. Right. And he remember in that speech and he said, don’t worry, this is not a problem. But because he wrote that speech, I could send it to the CEO, gave, I said, look, this is why I’m talking about it. Right.

00:26:17 [Speaker Changed] The, so if the head of the Fed is talking about it, I I should be treated talking. Yeah. Right. What was he vice chair or just a governor back then, or was that as chairman?

00:26:24 [Speaker Changed] He was chair, I think at the time. He was, yeah, he was definitely chair to the CEO’s credit. He said, okay, you know, you publish it and it’s the best thing that ever happened to Well, one of the things, best things that happened to Moody’s, because when the Financial Inquiry Commission, you remember the Financial Inquiry

00:26:39 [Speaker Changed] Commission? Sure. FCIC. Absolutely. Yeah.

00:26:40 [Speaker Changed] They,

00:26:41 [Speaker Changed] They, and that I have that book. It’s like this thick sitting on a show.

00:26:44 [Speaker Changed] Oh, yeah, yeah, yeah, yeah. I I was, I was that report, I testified I was the first Yes. Panel. Oh really? Those panelists. Yeah.

00:26:50 [Speaker Changed] Amazing.

00:26:51 [Speaker Changed] And of course, the CEO was a later panel with Warren Buffet. Warren Buffet was the, is a shareholder in Moody’s. I think he still is a big shareholder. The lawmakers were questioning them and the CE could say, Hey, look, here’s, here’s the study.

00:27:05 [Speaker Changed] Hey, can I tell you something? A little, a little self-awareness.

00:27:09 [Speaker Changed] And so that, yeah, I’ve been there for 20 years. I love Moody’s. And, but that really helped a lot. Right. In every respect. It helped my credibility.

00:27:19 [Speaker Changed] Helped the company’s

00:27:20 [Speaker Changed] Credibility. Yeah. Help the company’s cred established a set of ground rules that I’m able to write about, think about, talk about anything that I think is important about the economy. All that was established in that point. Now that, that’s getting tested at different points in time as we move along here. But, and we’re in a trying time now, but that was very, very important to my successful stay at Moody’s for 20 years.

00:27:43 [Speaker Changed] I, I wish I could remember who wrote a criticism in response to the Bernanke speech about subprime. ’cause the line was subprime is contained. Yeah. And the response, it could have been Alan SSON and Barron’s, it could have been James Grant, could have been Josh Rosner, Chris, Chris Waylan. Oh, great. Yeah. But it was, yes, subprime is contained to planet Earth. The rest of the solar system is safe. Right. And I, it was one of those lines where, damn, I wish I wrote that. That just, I, I might have been Ableson or Grant, but that

00:28:15 [Speaker Changed] Sounds like a Jim grant.

00:28:17 [Speaker Changed] It, it very much does. It’s sort of dry. Is he still writing Jim Grant? I think so.

00:28:21 [Speaker Changed] Yeah. You know, we kinda lost track.

00:28:23 [Speaker Changed] Yeah. It, it happens. Especially in this era of substack where Right. Your inbox is just overflowed with, with stuff. So you got some pushback, but they cleared it. I gotta ask, what was your experience like at Moody’s during the great financial crisis? It had to be 24 7 work plus terrifying everything.

00:28:46 [Speaker Changed] Oh, it was an amazing scary, I can remember a few scary mo real scary moments in, in my mind. You know, when I get, I got a call from a CEO of a major retailer saying that, you know, if we don’t do something, he’s going to not be able to make payroll, you know, on. And I’m saying, I’m thinking to myself, he’s telling me this, so we got a real problem.

00:29:08 [Speaker Changed] Well, he wants you to tell DC Yeah, that’s,

00:29:11 [Speaker Changed] That’s exactly what it was. DC That was exactly what it was. I did,

00:29:14 [Speaker Changed] Didn’t the Bush administration, I don’t remember if it was Hank Paulson or, or Bernanke have conversations, maybe it was the CEO of, of Ford or gm, Hey, we have money, but our credit facility is frozen. We can’t get at our money to make payroll.

00:29:30 [Speaker Changed] Right. Well, there was so many things going on. I remember this commercial paper market was, had frozen and Yep. Completely frozen. And of course that’s key to making payroll for a lot of these

00:29:40 [Speaker Changed] Companies. I, I have a buddy who was on a derivatives trading desk, and he always pushes back when I use the word frozen, he’s like, Hey, I dunno what you’re talking about. We were trading billions of dollars a day in paper. It was just discounted 30, 40, 50%. Oh, there you go. So there was liquidity, but there was a haircut involved.

00:29:58 [Speaker Changed] Well, and also just trying to find out, was it 30 or was it 50 or was it 75? You don’t know. Yeah, you don’t know.

00:30:04 [Speaker Changed] You really don’t know the that that led to the line. There’s no such thing as toxic paper. Only toxic prices.

00:30:10 [Speaker Changed] There you go. Yeah.

00:30:11 [Speaker Changed] So, yeah, absolutely. So, so that experience had to be just mind blowing.

00:30:16 [Speaker Changed] Well, and also from coming just a purely academic perspective for an economist, I mean, this was just an incredible time. One, once every century you see something like this and you, there’s so much that you’re learning while you’re doing. And it, it was not only just economics, it was also political economy. You know, how do, what, what should lawmakers do and how should they do it? And, and all the moving parts there. So it was a very amazing time. And that’s when I wrote that first book was I, it’s not a great book, Barry. And there is a, I wrote, did write a chapter, chapter seven on the rating agencies, but I did not put it in ’cause I was part of the rating agency and no one would’ve believed me. Anyway.

00:30:58 [Speaker Changed] Now you’ve been there 20 years. The financial crisis is more than 15 years in, in the rear window. Tell us a little bit about what Moody’s Analytics is doing here. And now.

00:31:12 [Speaker Changed] We’re very simple business. My part of Moody’s is a very simple business. We produce economic forecasts in scenarios.

00:31:20 [Speaker Changed] Yeah. But that’s not really a simple thing to do. There’s a lot of inputs and a lot of moving parts.

00:31:26 [Speaker Changed] There is, but the actual business itself is very simple. And the, the, one of the things that has been kind of a tailwind to our work has been the regulatory environment. Right. The financial institutions all over the globe need to do stress tests, capital planning. It’s even now embedded in the loan loss provisioning Cecil here in the US as an accounting framework that requires forward looking projections. If R nine overseas, climate stress testing, all those things require a very disciplined, comprehensive approach to economic forecasting. And so that’s really been key to key to the business here over the last 10, 15 years.

00:32:12 [Speaker Changed] So that’s kind of interesting. Your clients, are they necessarily Wall Street investing firms? Are they government institutions or non-governmental agencies?

00:32:23 [Speaker Changed] All, all of the above. All

00:32:24 [Speaker Changed] The above. When, when I think of climate stress testing, I, I, I just was involved in this silly debate about climate change. And my answer is, Hey, my opinion is irrelevant. Go talk to an insurer if climate change is a hoax. Yeah, great point. And and what, what are your experiences doing climate stress tests for you? Look how hard it is to get insurance in places like Florida. Like how significant is something like that to the sort of research you would sell to a private entity like insurance?

00:32:56 [Speaker Changed] Yeah, it’s, it’s critical. So house prices, go look at house prices in Florida, we’re talking about the west coast of Florida. They’re falling and they’re falling because homeowner’s insurance costs are rising because of the cost of, of hurricanes and other storm damage. So the insurers take that all in. They raise a homeowner’s insurance and that depresses demand and, and price. And of course that has all kinds of implications for mortgage credit risk for if you’re an mortgage insurer, if you’re in the mortgage business, in any, in any kind of respect. So that’s a great example of where, you know, the kind of economic forecasting is really critical to what’s going on in real life. And, and particularly with climate, it’s real. It’s, it’s happening. There’s damage and insurers are trying to figure that out. And they’re now building that into their premiums. And it’s having a real impact in, right now it’s more concentrated in places like Florida and Texas and California. But it’s gonna become more of a, a problem in other parts of the country. You know, pretty quickly,

00:33:56 [Speaker Changed] Huh? To to, to say the very least, we’ve seen fires in California. We’ve seen flooding in the Mid-Atlantic states. Well,

00:34:04 [Speaker Changed] Let me, here’s a good factoid for you or I’ll ask you, I’ll ask you guess which state has the highest homeowner’s insurance costs in the country?

00:34:13 [Speaker Changed] So the two that come to mind immediately are Florida and California. But the question makes me

00:34:19 [Speaker Changed] Think of

00:34:20 [Speaker Changed] Wonder are, are we talking about places like Texas or car, the Carolinas,

00:34:26 [Speaker Changed] Nebraska,

00:34:27 [Speaker Changed] NBRA ’cause of tornadoes?

00:34:29 [Speaker Changed] Well, yeah, in convection, convective storms, the, the, the, the big thunderstorms that come along and they drop a lot of

00:34:37 [Speaker Changed] That hail.

00:34:38 [Speaker Changed] The hail does tremendous damage. Yeah,

00:34:40 [Speaker Changed] Yeah. You know, we just had a mild storm and this little branch smashes the windshield of the truck. And I’m waiting three weeks to, to replace it. And when I asked the ins, we have glass coverage, and I asked the insurer about this, they’re like, you have no idea how backed up everything is. And yeah, there are delays in getting dumb things like windshields. Right. So all that stuff plus all the pandemic shortage of automobiles and things like that, that’s driven automobile insurance up. I never would’ve guessed Nebraska. That’s an amazing,

00:35:15 [Speaker Changed] Yeah. Isn’t that interesting? And, and, and also,

00:35:17 [Speaker Changed] Who’s number two or three? I’m curious who’s right behind them? Oh,
like we are a

00:35:21 [Speaker Changed] Florida, they’re, they’re up there. They’re up, they’re definitely up there. Top 10. Yeah. Top 10. The state that had the lowest, and this is I’m sure gonna change when we get more up to date data is Hawaii, but

00:35:30 [Speaker Changed] Well, you just had the, there,

00:35:31 [Speaker Changed] The fires. Fires. So that’s gonna change. But that, that had been the case. But the other thing is, overseas climate is a real issue. Just go to Indonesia, whether Right, the central bank is, you know, a client and they, they’re doing a lot of climate assessment because Jakarta is increasingly underwater. Right. So literally

00:35:51 [Speaker Changed] Not, you don’t mean negative cash flow, you mean

00:35:54 [Speaker Changed] Literally under sea. Water is, sea level is rising and there’s there’s there it’s doing real damage. And so you have to consider that. So here in the US it’s a, an issue overseas is becoming in some parts of the world, existential,

00:36:07 [Speaker Changed] You know, the, I’m trying to remember if this was wired or the Atlantic, but there was a big piece a year or two ago about Miami and the flooding risk from Miami. And this is very surprising. It’s not the seas coming over the land, it’s that so much of South Florida is built on the sort of limestone Yeah. Base. Yeah. Which is very porous to water. And so the flooding is not storms surging over the coastline, it’s bubbling up water bubbling up from Right. Literally it’s like a crazy, I never, you know. Yeah. It, it, there’s so many random factors that if it’s not your space. Yeah. Wow. Like I never would’ve guessed Nebraska and I never would’ve guessed Southern Florida’s. Well

00:36:52 [Speaker Changed] That’s why those sinkhole Right. That’s why the, the sinkholes are a real problem because where in Florida? No kidding. Yeah, because the bubbling up it undermines the, the, the ground.

00:37:01 [Speaker Changed] Huh. That, that’s, that’s unbelievable. Coming up, we continue our conversation with Mark Zandy, chief economist at Moody’s discussing the state of the economy today. I’m Barry Ritholtz, you’re listening to Masters Business on Bloomberg Radio.

00:37:26 I’m Barry Ritholtz. You are listening to Masters in Business on Bloomberg Radio. My better than average guest this week is Mark Zai. He’s the chief economist of Moody’s and hosts, I’ll take it, hosts my extra special guest. You called me out on it. So you know, con O’Brien’s podcast, he makes everybody say their name and I feel blank to be Conan O’Brien’s friend. And it’s kind of a funny, throw it to the guest to fill that in. And I forgot her name. She was on shrinking Jessica and former Daily Show. She said, I feel pressured to say anything about being Corn Bride and Fred. So I kind of painted myself into the corner. Maybe I’m gonna have the guest. Oh,

00:38:14 [Speaker Changed] You did a great job getting out of it. So

00:38:16 [Speaker Changed] No, maybe I have the guest say, what sort of a guest are you this week? So let’s talk about the state of the US economy today. How do you assess where we are? What indicators are most concerning to you? And then we will drill down more specifically.

00:38:32 [Speaker Changed] The economy’s struggling. I think it’s on the precipice of recession.

00:38:37 [Speaker Changed] Precipice of recession. Yeah. What does that mean? Does that mean 50 50 chance this year? ’cause we’ve had economists forecasting recession pretty much since 2022. Not me.

00:38:49 [Speaker Changed] Not me. I haven’t been. So this is, so this is a

00:38:52 [Speaker Changed] Change. You’re now starting to get more cautious. This as nervous

00:38:55 [Speaker Changed] As I’ve been since.

00:38:55 [Speaker Changed] And you’ve been robust. You’ve seen this as a robust economy the past few years.

00:39:00 [Speaker Changed] I have. Yeah.

00:39:01 [Speaker Changed] So the switch is, is significant. It is. So what, what is driving that?

00:39:06 [Speaker Changed] And I have to be humble. I, because the, what a LC economy’s pretty obvious it’s economic policy and it can change quickly. Therefore you have to be humble here because policy can change and we may not, the economy may find its footing as a result and we avoid recession. So there’s a lot of, I hate using the word, but it’s the only word I can think of. It’s uncertainty. I mean, there is a lot of, of that in, in economic

00:39:31 [Speaker Changed] Forecast. I, I steer clear of the U word and, and

00:39:34 [Speaker Changed] What do you say?

00:39:35 [Speaker Changed] Just lack of clarity.

00:39:36 [Speaker Changed] I can like

00:39:37 [Speaker Changed] That because I think it’s, yeah, I think it’s not as pregnant as

00:39:40 [Speaker Changed] UNC

00:39:41 [Speaker Changed] Uncertainty. Yeah, yeah. Lack of clarity. But, but no doubt about that. Yeah. We’ve seen CFOs talk about withholding CapEx spending and even families postponing trips to disneylands

00:39:53 [Speaker Changed] And the data. Say it. So GDP growth, the value of all the things we produce, that was barely 1% in the first half of the year. Right. Consumer spending has gone nowhere all year long. Manufacturing’s in recession. Constructions in recession, transportation distribution is in recession.

00:40:09 [Speaker Changed] Not, not, you’re not saying this is growth rate is slowing, you’re saying this is in the

00:40:14 [Speaker Changed] Red In the red in red, yeah.

00:40:16 [Speaker Changed] Manufacturing, construction. Why is construction in the red there such a demand for housing.

00:40:22 [Speaker Changed] Home building is weakening very rapidly. Really

00:40:25 [Speaker Changed] That a function of high rates and mortgages? Or is that a function of, hey, we can’t find people to build these houses to say nothing of. We’re going to Home Depot and deporting the guys looking for workouts.

00:40:37 [Speaker Changed] It’s affordability. People can’t afford the new homes.

00:40:38 [Speaker Changed] That’s all it is. Yeah. It’s just affordability.

00:40:40 [Speaker Changed] And, and the builders have done an admirable job trying with incentives, interest rate, buy downs to keep the market going and maintaining construction levels. But that’s over the, they’re not able to do it. The this

00:40:52 [Speaker Changed] No more buying down rates. No.

00:40:53 [Speaker Changed] So now we’re seeing single family home building come down for the first time. Multifamily has been coming down for, for, for at least a year. Right. ’cause it got overbuilt. All these luxury towers going up in New York and Philly

00:41:04 [Speaker Changed] And Chicago, Palm Beach. It just up

00:41:05 [Speaker Changed] Vacancy rates. Rates are too high. Rents are too weak. The commercial non-residential side is also very weak. The only strength is data centers. Clearly. Clearly. Yeah. And that, that, even with that though, if you look at overall construction spending, it’s like over, was it $2 trillion? It’s declining.

00:41:22 [Speaker Changed] It’s declining. So I was on the impression that medical facilities, warehouses, things like that were still fairly robust. You’re telling me that’s no longer

00:41:32 [Speaker Changed] The case. It there’s different They’re in Yeah. Yeah. There. I you know, healthcare is fine. Data center’s, booming offices are way down. Multifamily ISS down residential, single family’s way down. So you add it all up and now public instruction’s starting to roll over. Right, right. Because you had that big lift because of the infrastructure legislation that was passed a few years ago

00:41:53 [Speaker Changed] Still. But it’s still on Some of it is still on ongoing. It’s, it’s

00:41:55 [Speaker Changed] High. But the, you know, that the, it’s now rolling over. It’s a high level of spending, but you’ve now passed the peak. Right. And spending, it is now starting to come in and we’re not gonna see any more infrastructure spending on the public side for, you know, quite some time. Really? I

00:42:06 [Speaker Changed] Don’t think so. I thought that would continue on for a couple of years. Wasn’t that like a five or 10

00:42:10 [Speaker Changed] Year legislation? It’s, it’s an elevated level.

00:42:12 [Speaker Changed] Oh. And then it starts the tail down. But

00:42:14 [Speaker Changed] What really matters for growth is the change in Gotcha. And you’ve passed the peak. Yeah. It’s coming now starting.

00:42:19 [Speaker Changed] So you’ve talked about everything. We haven’t gotten to labor

00:42:22 [Speaker Changed] Jobs, by the way. That’s,

00:42:23 [Speaker Changed] That’s my next question. Yeah. Tell us about the labor market. It it,

00:42:26 [Speaker Changed] It’s consistent with the economy of struggling. The job numbers are showing very little job growth in recent months. And I would not be surprised in the next few months, assuming we get the data from the rural labor statistics, we can count on talk about that. But assuming we actually get the data, we could actually see some, and that we would not be surprised if we saw some negative numbers, you know, actual declines in employment.

00:42:48 [Speaker Changed] So, so Jim Bianco said something the other day that really kind of surprised me. First time in US history, we are actually seeing negative population growth. Not, not caused by a war or anything, but immigrants aren’t coming to the country and people are being deported. And by the end of 2025, we may have a lower total population number than we had at the end of 2024. What does that mean for the labor market?

00:43:16 [Speaker Changed] Yeah. I mean, at the end of the day, if you’re a full employment and we’re close 4.2% unemployment rate, the only way you can generate a job is if you’ve got someone to fill the job. Right. You need a labor, you need someone who’s working. So if the labor force isn’t growing, and right now it’s just flat, it really has, well actually if you look at,

00:43:35 [Speaker Changed] Well, you could have job openings, but just they’re unfilled. Get the, that’s data. And that’s,

00:43:39 [Speaker Changed] That’s right. But it’s not a job until you fill it. Right. So you could actually, and right now labor force is declining if you believe the data, believe the precision of the data. But the level of the labor force in July, the last data point is higher, is lower than it was back in January. And so that would suggest that it’s gonna be very difficult for the economy to, to generate jobs. And it’s very possible we start getting job loss and just negative numbers.

00:44:06 [Speaker Changed] So, so what are, what odds are you putting on a recession? And we, we’ll talk about inflation and tariffs in a moment, but what odds are you putting on a recession in Q4 2025 or Q1 2026? I,

00:44:19 [Speaker Changed] I, I think our baseline outlook, my baseline outlook has no recession, just a weak economy. We kind of struggle the way

00:44:27 [Speaker Changed] Through like a sub 1%. GDP and a slightly.

00:44:30 [Speaker Changed] It’s a 1%, it’s actually 1% on the nose year over year through Q4 of this year, Q1 of next, which is historically below the economy’s potential. Right. No job growth.

00:44:39 [Speaker Changed] Zero like a zero BLS print every month.

00:44:42 [Speaker Changed] I think I have average monthly job growth in

00:44:45 [Speaker Changed] Sub 100. Oh

00:44:46 [Speaker Changed] Wait, wait, like 20 5K Really? 25 50 K, something like that. Yeah.

00:44:50 [Speaker Changed] That, that’s a, you know what’s shocking about this sort of discussion is regardless of who you voted for or what your political affiliation is, there’s no debate. The first quarter, 2025 was a very robust economy with markets hitting all time highs. And here we are eight months later, revenue is high, profits are high expectations of, of forward growth in the stock market is high. I know the old joke is stock markets have predicted none of the last four recessions. Right? Right. But what are all time highs and this ongoing enthusiasm for growing corporate profits? What, what is that saying about the

00:45:38 [Speaker Changed] Economy? Yeah. And that’s the reason why, one reason why I don’t have a recession in the baseline, the equity market is held up. Although obviously a big part of what’s going on in the equity market is related to ai. And that has nothing to do with the business cycle. That’s

00:45:50 [Speaker Changed] It’s ai and half of the s and p 500 revenues are overseas. So it may not be reflecting US

00:45:56 [Speaker Changed] Growth. And also you got tax cuts, right? So if you just assume a

00:45:59 [Speaker Changed] Stimulus, fiscal stimulus, you have pe

00:46:01 [Speaker Changed] Constant PE multiple. If you raise after tax earnings, you should get a higher price. So if you, if you abstract from those things that are independent of the economic cycle, the stock market at best is flat from, from where it’s at the beginning of the year. And that that’s the economy. It’s flat, it’s, it’s gone nowhere. Now the

00:46:17 [Speaker Changed] Economy is flat, but it, it mean the stock market can still elevate off a flat economy with tax cuts AI spending. Exactly.

00:46:24 [Speaker Changed] International. And that’s my sense of what’s happening. What’s what happen. So what’s going on in the equity market is actually, I think, consistent with what we’re observing in the economy. Now, if the stock market starts to head south writ large, and we see non-AI part of the market starting to go south here, I think that’s a strong signal that we’re we’re going in, that we’re going into. And, and the equity market is not only important as a signal, but increasingly it drives economic activity because the bulk of spending in the economy today is done by folks in the top part of the income and wealth distribution.

00:47:00 [Speaker Changed] Top 20% is half of all

00:47:02 [Speaker Changed] Spending by our calculation, the top 10% account for, oh say you’re right. It’s top 20% account for 50% of the spending. Right,

00:47:09 [Speaker Changed] Right. Top and the top 10% is most of that and

00:47:12 [Speaker Changed] Most of that. And the top 5% is most, most of that. So, so

00:47:15 [Speaker Changed] Very not a well distributed consumer spend. It’s it’s high-end. High-end and luxury goods. Which, you know, that’s top 2% like that, that that skew is very, the good news is if you go buy a private jet, you can depreciate all of it in year one of, there you go. The I didn’t know that. Thanks to the thanks to the new tax bill. Bill. Yeah. But that’s sort stuff. So I remember when Bush did his accelerated depreciation, which I wanna say it was depending on the item, it was three to seven years instead of 10 to 20 years. 20. Right.

00:47:58 [Speaker Changed] Being

00:47:58 [Speaker Changed] Able to depreciate these luxury goods, maybe that’s a factor in driving some higher

00:48:04 [Speaker Changed] Spending. Yeah. And that should also help the construction markets too, right? Because

00:48:08 [Speaker Changed] You would, you would think, right? Yeah,

00:48:10 [Speaker Changed] I’d take some

00:48:10 [Speaker Changed] Time. Real estate’s a little different. Yeah. So I don’t know if you could depreciate all of your build out in year one, but I’m going to guess it’s not a 20 year depreciation schedule. You probably can do it. Right. I should really ask one of my tax guys what the depreciation schedule is for new construction. ’cause you would think that would encourage more building and we desperately need more single family homes

00:48:35 [Speaker Changed] And that, and that may be the way out of recession. Not only the, it is really get more fiscal support. Right. And that, and we, we will likely get another reconciliation, a piece of BBB. The bill big beautiful bill was reconciliation. They’ll take another, they have another shot at that on the other side of the fiscal year.

00:48:51 [Speaker Changed] October.

00:48:52 [Speaker Changed] Yeah. That’s when the new fiscal year begins. And so they could come up with more stimulus. Yeah. Right. I you’ve heard talk of a stimulus check, you know, I’ll pay for the, we will take the tariff revenue and I’ll rebate some of that back to Americans in the form of a check. And that would, that that would be stimulus for sure. And that would support

00:49:10 [Speaker Changed] The economy. Listen to work. The last Trump administration, he wrote a check. Exactly. And when people were stuck at home. Right. And you know, I I try and be non-partisan when I look at those sort of things. It turns out Keens was onto something a century ago, wasn’t he? Well,

00:49:25 [Speaker Changed] Particularly if the economy’s not at full employment. If you’re, if you’re flat on your back like you were in the pandemic or the financial crisis, you provide stimulus, then you don’t get the crowding out. You don’t get the higher interest rates, you don’t get the inflation, but you get the growth.

00:49:37 [Speaker Changed] So, so, but

00:49:38 [Speaker Changed] You’re now, we’re now closer to full employment. So that’s a bit of a more dangerous game, right. Because if you overstimulate and you’re in full employment, you’re gonna get the inflation already inflation’s an issue given the tariffs and the immigration policy.

00:49:49 [Speaker Changed] So let’s talk about tariffs before we get to inflation. What’s your perspective of the impact of both the policy and the way it’s been implemented?

00:50:00 [Speaker Changed] Well, I’m not a fan of broad-based tariffs. I mean strategic tariffs, no problem. I can, I can kind of get that, but broad-based tariffs. So, you know, we’ve been there, we’ve done that. You mentioned the 1930s, in fact, you can go back a hundred years before that under Andrew Jackson. And we tried broad-based turfs and it didn’t work out so well. It takes about a hundred years for us to forget the mistake and do it again. So I- I-I-I-I don’t think this is gonna end well. It, it, it’s raises inflation by definition. And then we’ll see more of those pass those prices pass through to consumers over the next six, 12 months as the time passes here. And it lowers growth. It’s, it’s pushes the economy towards stagflation and, and the immigration policy, highly restrictive immigration policy. And I, and I get the, the need for addressing the southern border.

00:50:45 [Speaker Changed] We’re we’re talking about legal immigration, not illegal

00:50:48 [Speaker Changed] Immigration. Exactly. It’s very restrictive. And that does, that reinforces the higher inflation and the weaker growth. So you’ve got two policies that are very substative of working together to raise inflation work. Weak, weak economic activity. So

00:51:03 [Speaker Changed] Reducing legal immigration contributes to higher inflation. Explain that.

00:51:07 [Speaker Changed] You’re in a very, go back to the labor force. Tight labor market. Gotcha. Just

00:51:12 [Speaker Changed] Less bodies, higher weights.

00:51:13 [Speaker Changed] You’re constructing a lot of businesses. Ag we know that. Restaurants, construction. Yeah. Leisure, hospitality, elder care, childcare, all those things. And it will ra it presumably will raise costs, labor costs, you’ll see wages rise and add to inflationary

00:51:29 [Speaker Changed] Pressures. So, so we keep hearing from the Fed that they’re data dependent, things are ambiguous. There’s no clear, necessarily clear path to future policy. Is that a reasonable response given everything that’s been going on? Because it seems odd to, to say, on the one hand, we’re at risk of recession. On the other hand, there’s a chance of increased inflation. Sounds a lot like seventies era stagflation. It

00:51:58 [Speaker Changed] Is stagflation.

00:51:59 [Speaker Changed] What does that mean for where rates could go over the next couple of meetings? It seems like a 25 BIP cut is sort of locked into September. Right. And I don’t know how much of that is, Hey, let’s just throw a virgin in the volcano and make the, make the president happy. But they’re in credible reasons, in both directions. This isn’t like a one-sided debate. I

00:52:24 [Speaker Changed] I I think the, their decision to stay on hold was the right decision. ’cause they don’t know what do I respond to the inflation that I know is coming or the weaker growth that is in train. I, I just, and I don’t know what, where the policies are. I don’t, I have no sense of where the tariffs are gonna land, when they’re gonna land there. I don’t know what’s going on with immigration policy. So let’s just sit on our hands and just let this thing unfold a little bit before we can move on. Policy businesses are done roughly the same thing. They’re saying, I don’t really know, therefore it’s not, I’m gonna cut, but it means I’m not gonna expand. I’m gonna sit on my hands. And that’s why the economy has gone sideways here since the beginning of the year, but here we are now, and if I’m, you’re at the Fed, and I think their, the, their kind of, their weights on their, their, their goals are, are shifting.

00:53:08 They’re putting more weight on the economy than on inflation. They’re thinking is inflation because of the tariffs will be more one off. They won’t be persistent, which I think is a reasonable thing to think, but we will have to see. But we know the economy’s weakening, particularly the job numbers. And I, and I, again, going back to, we’re gonna get some negative numbers here, and I think that’s what they want to avoid, particularly in the context of the political environment, because there’s a lot of stuff coming outta Washington about reevaluating the fed’s, the Federal Reserve Act of 20 of 1913, their independence. And if you’re at the Fed and you’re seeing that the, the last thing you wanna do is go into a recession and get blamed for the recession in the context of all those, kind of, that political

00:53:49 [Speaker Changed] Overlay to, to say the very least. So, so we haven’t really talked about integrity of data, but since you alluded to it earlier, let’s bring it up. You know, I’m a big fan of George Box. All models are wrong. Yep. But some are useful. Yep. And so my experience over the past, I don’t know, 15 years, whenever I have a question about how something is put together in either a BEA or BLS data point, I just pick up the phone and call them and they eventually route you to the person, oh, here’s in charge, the person who developed the birth death model, or here’s the person in charge of, of survey data. They couldn’t be more forthcoming, transparent, and helpful. Totally. And I, I’m kind of surprised at some of the crazy stuff I hear from people. I just heard a bunch of stuff about the M-I-B- M-I-T billion price project. Yeah. Which ended up getting picked up by somebody and they were talking about how great that is. And I’m like, Hey, when you track this against CPI, they’re almost identical. So they’re both different models. One is a little more skewed to the weighting of how consumers spend money. The other is just scraping all these data points, but they end up in the same place. How do you think about the integrity of data from the BLSI?

00:55:11 [Speaker Changed] Right now I think it’s gr I think it’s fine. There’s problems particularly with survey responses, but everyone’s

00:55:20 [Speaker Changed] Response. But that’s true everywhere. Look at University of Michigan. Sentiment data has been absolutely plummeting for 10 years.

00:55:24 [Speaker Changed] And the answer to that isn’t cut budgets. It isn’t to cut staff. It is to put more resource in to help try to figure out how to improve those response rates. But even in the employment data, the payroll employment data that we’re focused on, the response rates by the third month is the first month, the response rate’s 65, I’m making this up, but roughly speaking, 65%, 70%, which

00:55:44 [Speaker Changed] Is below what it used to be.

00:55:45 [Speaker Changed] It’s down from where it was by the third. It’s 90, 95%. So it’s still a very, very good survey. But we all, we, as a result of the low response rates, we always get revisions to the data. In more typical times when the economy’s moving in a straight line, those revisions are small. When you’re at an inflection point or a turning point, like I’ve been arguing, we are, you get these big revisions. In fact, there’s information in the revisions. It’s not, it’s not a a bug, it’s a, it’s a feature. It’s saying, Hey, the economy’s weakening. And so the response rates, the responses we’re getting after, after the first month are weaker than the ones we got in the first month. And therefore we’re revising down the data. That signaling that’s a, that’s a strong tell that the economy is struggling and potentially at a, a

00:56:28 [Speaker Changed] Turning point. So, so you are saying the July non-farm payroll, and I, I don’t wanna put words into your mouth. We had a July non-farm payroll that was pretty punk that came out the first week in August. But the revisions were substantial for the prior two months. This isn’t just a noisy data series or somehow partisan wrangling. This is a warning shot across the bow. Hey, the economy is starting to transition into a weaker state. Exactly. Pay attention. Is is that a, that’s the

00:56:58 [Speaker Changed] Point. That’s the point. It’s not that the data is any worse than it has been historically. There’s anything nefarious going on. It’s, that is the nature of the, of the data and it’s telling us something. There’s real information there. And so I, you know, I do, the thing I worry about the most is if there’s a decision to not release the data as timely as it’s being released today, the employment numbers that we’ve been talking about are the most timely data that get released. The Friday of the first

00:57:25 [Speaker Changed] One. Oh, the quarterly nonsense that came out. That just seems

00:57:28 [Speaker Changed] Yeah, that really makes me nervous

00:57:29 [Speaker Changed] That that’s, I I think Wall Street would’ve a hissy fit. You do if that happened. Yeah. The, the, you know what people talk about the, the, the Powell put? Yep. I I prefer the expression, the the Trump collar. Yeah. When the, when the market’s near all time highs, he’s emboldened and rolls out stuff. When the market’s down 15, 20%. That’s a floor. All right, we’ll pause this for 90 days. Yeah. Because rightly or wrongly, and I think there’s more to this than we, we give President Trump credit for. But when the stock market is doing well, he takes that as his report card. And when the stock market is doing poorly, it makes him unhappy. And his bias is towards doing something, anything. What do we have to do to get the stock market back on track? Right. He doesn’t care about polls. He cares about one poll. And that’s the Dow Jones Industrial average. Yeah. Or the Nasdaq or the s and p. Yeah. Yeah. Kind of focuses his

00:58:27 [Speaker Changed] Attention. Yeah. Yeah. That’s a nice way of putting it. The Trump collar. Yeah.

00:58:30 [Speaker Changed] So, so I don’t wanna make you late for lunch. I have one more question before we get to our speed round. Our favorite questions. Oh. And, and it, it’s a curve ball question, which is, what are investors and economists not talking about, but perhaps they should be. What, what do you think is an important topic, and I don’t care. Policy assets, geographies, what’s getting overlooked, but shouldn’t,

00:58:57 [Speaker Changed] I’d say fed independence. Not that people aren’t talking about it, but they’re not focused on it. Like they should be focused on it. I think this is a real, potentially a real significant problem. And they’re, the, the, the independence of the Fed is critical to a well-functioning market economy, like our own, we know that from our own history. You can see what happened back in the seventies and eighties and or looking overseas. Sure. And we need to preserve that independence. And it’s not only about the actual independence, it’s the perception of independence. That’s really critical. And I, I just doesn’t, it doesn’t feel like to me, you follow markets more closely than I do. May maybe have a different view, but I just don’t get the sense markets are focused on this like they should be at this point in time. Huh.

00:59:39 [Speaker Changed] Pretty, pretty interesting take. All right. Let’s jump to our speed round. Okay. Feel free to, all right. Bang through these as quickly as you want. And we’ll get you to lunch on time. Starting with, who are your mentors who helped shape your career?

00:59:52 [Speaker Changed] Well, I mentioned Dr. Klein, the Nobel Laureate. He clearly was a, a key person in my professional life. My father professor of engineering at Penn, by the way. He will, he will claim he, he was the first to use neural nets back in the day. Huh. So for, for the studies he was doing. But I’d say those two folks are, those two, two men were the key to my, to my professional development.

01:00:20 [Speaker Changed] Let’s talk about books. What are some of your favorites? What are you reading right

01:00:23 [Speaker Changed] Now? It sounds hackney now, but you know, Barry, I like, I just love Alexander Hamilton by Chernow. I mean, I, that was, why is that

01:00:30 [Speaker Changed] Hackney?

01:00:31 [Speaker Changed] Well, because now everyone,

01:00:32 [Speaker Changed] The book doesn’t have any wrapping in it. People should be aware if they go get this book. Yeah. It’s a deep historical dive. It’s not a entertaining bunch of show tunes.

01:00:42 [Speaker Changed] I Oh, yes, that’s for sure. But it’s very entertaining. I I, at least from a nerdy kind of perspective. I think

01:00:48 [Speaker Changed] Cher now has a new book coming out this fall, doesn’t he? Or did it come out already?

01:00:51 [Speaker Changed] Well, I’ve got the, I’m reading the one on Washington.

01:00:54 [Speaker Changed] Is that, is that his latest?

01:00:55 [Speaker Changed] That might be. I think that’s his latest. Yeah, I think so.

01:00:57 [Speaker Changed] He, he is an amazing writer. And,

01:01:01 [Speaker Changed] And I like that period in economic history

01:01:05 [Speaker Changed] To, to say the, the, the very least. It’s, and I,

01:01:08 [Speaker Changed] It’s don’t fascinating. I don’t normally read self-help books, but I, I like this book Outlive. I know everyone else has read it by 3, 4, 4 years ago. So now I’m hanging,

01:01:17 [Speaker Changed] Is it worth reading? It’s, oh, mark Twain is his name.

01:01:21 [Speaker Changed] Oh, mark Twain.

01:01:21 [Speaker Changed] That’s right’s. I ha it’s, it’s a twain. Big to Yeah. It’s sitting on my nightstand gathering dust. ’cause it’s so,

01:01:28 [Speaker Changed] I don’t know how he does it.

01:01:29 [Speaker Changed] So intimidating. Yeah. Deep, deep research. Yeah. Outlive.

01:01:34 [Speaker Changed] Oh yeah. So it’s an easy book, a summer book Right. When you’re on the beach. It, it, it’s a how do you live your life? Well, long run. And it’s a lot of, it’s just intuitive. It’s not non-intuitive, but there’s some things in there that I found useful in terms of the test you should take. And I love the, the hanging you, A big part of, of, of the work is around the strip grip strength. And so one of the ways you improve your grip strength is by just literally hanging from go try it. Okay. It’s, it’s, I’ve

01:02:08 [Speaker Changed] Been, he’s, by the way, you don’t have to

01:02:10 [Speaker Changed] Do, he

01:02:10 [Speaker Changed] Says chin ups or pullups. You just have to hang it. This is

01:02:12 [Speaker Changed] Hang You think this is easy. And he says, men, if men can do it for two minutes, that’s great. Women. One minute I’ll tell, tell you, I, I can’t get to, I literally cannot get to two

01:02:21 [Speaker Changed] Minutes. I, I can’t imagine I can, I Im not gonna do 10 pullups. Yeah. But I, I would be surprised if I couldn’t hang for right. For two minutes. But yeah, try

01:02:31 [Speaker Changed] It. Try it,

01:02:31 [Speaker Changed] Try it. Especially that, that’s, that’s interesting. Yeah. Yeah. Alright, so we’re talking about books. What about streaming? What are you watching you

01:02:38 [Speaker Changed] Listening to? Well, I, I, my wife and I watch something every night. Usually half hour to an hour. And

01:02:42 [Speaker Changed] We’re we’re the same. It’s a post pandemic is

01:02:45 [Speaker Changed] Hang there. What?

01:02:45 [Speaker Changed] It’s, yeah. Yeah. Because when you’re stuck at home, you couldn’t go out. Right. Didn’t we all

01:02:49 [Speaker Changed] Sort And I’m highly annoyed with all these streaming services. I like, like, come on, hand me a break. I mean, so,

01:02:55 [Speaker Changed] So what, what are you streaming these days?

01:02:57 [Speaker Changed] Well, I got, you got any suggestions? Yes.

01:02:59 [Speaker Changed] Yes, I do. I have plenty.

01:03:01 [Speaker Changed] I just finished disclaimer. Did you watch disclaimer?

01:03:03 [Speaker Changed] No, I, I love a good suggestion. Disclaimer.

01:03:06 [Speaker Changed] Yeah. It’s Kevin Klein and what’s her name? Cape Blanchet. Oh, no

01:03:11 [Speaker Changed] Kidding. It’s

01:03:12 [Speaker Changed] Short six seven. I love

01:03:14 [Speaker Changed] Those. We watched Department Q, which was a limited series.

01:03:17 [Speaker Changed] Department Q is good. Really

01:03:19 [Speaker Changed] Interesting.

01:03:19 [Speaker Changed] Yeah. Actually I watched that. That was very good. This is one I liked a lot. It’s the ending is the acting is great. Yeah. The ending is a little contrived. They need to do two more episodes or

01:03:28 [Speaker Changed] Something. I’ll give you three interesting things. We’ve been watching my wife this down, my wife got me sucked into Killing Eve, which is an espionage thriller. Oh, I heard this. We just, it’s four seasons. We just started the second season Killing Eve. Everybody in it is great. It’s a little, it’s a little, you know. Right. Some of it is, it’s not terribly gory. Right. People, people get killed. Yeah. It’s assassin. I’m okay. And yeah. You know, I don’t like the police procedurals where they show you all the it when it’s too realistic. Yeah. Like, we tried to watch The Pit. My wife is like, I’m out. Yeah. All right. I get that. So, so Killing Eve has been really interesting. That’s, that’s a good one. And you know what’s fascinating about the, the Gilded Age is it’s four stories. Old money, new money. Ah, the staff in both of these houses across the street. Right. And then the old Money Secretary, who is a black woman, and then her whole family and that storyline. But what’s amazing is all the issues. It’s 150 years

01:04:35 [Speaker Changed] Ago. Yeah. Same it today.

01:04:37 [Speaker Changed] It’s wealth inequality, it’s status, it’s economic mobility and it’s tribal. And it, it’s so fascinating. Gilded

01:04:46 [Speaker Changed] Age. The

01:04:46 [Speaker Changed] Gilded Age gr really?

01:04:48 [Speaker Changed] That’s a good one too.

01:04:49 [Speaker Changed] Interesting. Yeah. I I didn’t wanna watch it. To me it

01:04:51 [Speaker Changed] Just was a down abbey kind of thing, or

01:04:52 [Speaker Changed] Kind of, it looked like another soap opera. Yeah. But amazing cast, you get sucked into it, period. That’s on HBO. And so, so you

01:05:01 [Speaker Changed] Said three,

01:05:02 [Speaker Changed] You third it if, well, department Q was the department Q was the limited.

01:05:07 [Speaker Changed] That was a good one.

01:05:08 [Speaker Changed] If, if you like the, that’ll be back. I think if you like the espionage sort of thing, that one kind of unfolds really slowly. Yeah. And deliberately. But Killing Eve is much, it’s much faster and crazier and more interesting. And it, it’s mostly takes place in Europe, which makes it funner. You know, it’s MI six. Yeah. I, I won all sorts of awards. This, like, I got, she saw it Ready and when she was, she, I walk in and, and like, what’s this? She’s like, just watch 10 minutes of the first episode. All right. And we started watching it and sucked right in, so.

01:05:50 [Speaker Changed] Oh, that sounds good. Yeah, definitely. Watch that. And it’s four seasons we need. That’s,

01:05:53 [Speaker Changed] That’s right. So it gives you plenty. And I, you could bang out two a night very, very comfortably. Our final two questions. What sort of advice would you give a recent college grad interested in a career in economics and finance?

01:06:08 [Speaker Changed] Just show up.

01:06:09 [Speaker Changed] Show

01:06:09 [Speaker Changed] Up. Just show up. Do

01:06:10 [Speaker Changed] The work. Show up, show

01:06:12 [Speaker Changed] Up. Huh. I, I guess the other thing I’d say is I tell my kids this, every point of contact matters, every relationship, every phone call, every email, every teams meeting. Because things come around, you know, you meet somebody in one way, they’ll come back 10 years from now. And if they, if you did the right thing, if you were attentive to their, their needs and interests, it’ll, it’ll benefit you in the long run. It’s not easy to do it. It takes energy, but every point of contact matters.

01:06:51 [Speaker Changed] Huh. Really interesting. And our final question. What do you know about the world of economics today? You wish you knew way back in the 1990s when you were first starting out?

01:07:01 [Speaker Changed] Well, I didn’t, I thought everything could go back. Back to your point about box and models. I think ev I thought everything could be solved with a model. It’s like, you guys, come on. This is just arithmetic, you know, mathematics. We could, we could, we should be able to do this. No, you know, the world is a very messy place.

01:07:22 [Speaker Changed] Really, really good stuff. Mark, thank you for being so generous with your time. We have been speaking with Mark Zandy. He is the chief economist of Moody’s Analytics. If you enjoyed this conversation, check out any of the 550 previous discussions we’ve had over the past 11 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcast. And be sure and check out my new book, how Not to invest the ideas, numbers, and behaviors that destroys wealth and how to avoid them. How not to invest at your favorite bookstore. Now, I would be remiss if I did not thank the crack team that helps put these conversations together each week. Meredith Frank is my audio engineer. Alexis Noriega and Anna Luke are my producers. Sean Russo is my researcher. Sage Bauman is the head of podcasts at Bloomberg. I’m Barry Riol. You are listening to Masters in Business on Bloomberg Radio.

~~~

 

 

 

 

The post Transcript: Mark Zandi, chief economist of Moody’s Analytics appeared first on The Big Picture.

Today, in the Calculated Risk Real Estate Newsletter: Freddie Mac House Price Index Declined in July; Up 1.4% Year-over-Year

A brief excerpt:

Freddie Mac reported that its “National” Home Price Index (FMHPI) decreased -0.22% month-over-month (MoM) on a seasonally adjusted (SA) basis in July. On a year-over-year (YoY) basis, the National FMHPI was up 1.4% in July, down from up 1.8% YoY in June. The YoY increase peaked at 19.0% in July 2021, and for this cycle, bottomed at up 0.9% YoY in April 2023. ...

As of July, 31 states and D.C. were below their previous peaks, Seasonally Adjusted. The largest seasonally adjusted declines from the recent peaks are in D.C. (-5.2), California (-3.3%), North Carolina (-2.9%), Maryland (-2.7%), and Florida (-2.5%).

For cities (Core-based Statistical Areas, CBSA), 254 of the 384 CBSAs are below their previous peaks.

Here are the 30 cities with the largest declines from the peak, seasonally adjusted. Punta Gorda has passed Austin as the worst performing city. Note that 4 of the 5 cities with the largest price declines are in Florida. And 11 of the 30 cities are in Florida.

More cities (9) in California are now on the list.

There is much more in the article!

The post The Rich Wrote the Laws So that They Get all the Money, While the Left Was Sleeping appeared first on CEPR.

Lagarde's Hypocrisy: ECB Vs Fed Autonomy

Submitted by Thomas Kolbe

ECB President Christine Lagarde has warned the U.S. Federal Reserve not to lose its independence to politics. A transparent maneuver, considering the ECB has long since merged with Brussels into a political entity.

In an interview with French radio station Classique, Lagarde cautioned that U.S. President Donald Trump is attempting to seize control over the Federal Reserve. She said:

"If US monetary policy were no longer independent and instead dependent on the dictates of this or that person, then I believe that the effect on the balance of the American economy could, as a result of the effects this would have around the world, be very worrying."

Indeed, Trump (this or that person) is exerting massive pressure on the Fed. His attempt to exploit the internal scandal surrounding Fed Governor Lisa Cook to remove her via executive order and replace her with an ally is undisputed.

Cook is accused of providing false information in mortgage dealings, allegedly declaring an Atlanta condominium as her primary residence while previously claiming her Michigan home, raising the specter of mortgage fraud.

Good Cop, Bad Cop

Regardless of the outcome, this marks the latest peak in the battle between Trump and Fed Chairman Jerome Powell, whom Trump accuses of interest rate sabotage. Powell countered the massive inflation surge caused by liquidity injections during the COVID lockdowns with rapid rate hikes and has since kept U.S. rates well above other central banks. Trump, in contrast, calls for drastic rate cuts to free the frozen housing market and ease state interest burdens.

It remains unclear to what extent this public dispute between Trump and Powell follows a political script. Following a "good cop, bad cop" dynamic, both have successfully attracted investment into the U.S. through trade policy and high rates while simultaneously devaluing the dollar against other fiat currencies. Mission accomplished, for now: the deeply negative trade balance is slowly reversing, tariff revenues are rising, and U.S. industry is regaining ground.

Return to Private Money

Away from the Fed dispute, a small monetary revolution is unfolding in the U.S.: the partial return to a private banking money system. With the GENIUS Act and the rise of U.S. dollar stablecoins, the Trump administration has established the legal framework for private money creation.

Private banks will be able to issue their own stablecoins, each backed by collateral such as U.S. Treasury bonds, gold, or Bitcoin. The U.S. is moving toward a more stable, competitive monetary system that reduces leverage risk and strengthens the banking sector compared to its European counterpart.

Lagarde is not entirely wrong that Fed power may be constrained going forward. But unlike the state-centered Eurozone system, the U.S. banking sector stands to gain significant influence at the Fed’s expense.

Lagarde Has Humor

It is almost tragicomic that the ECB president warns of a loss of Fed autonomy. Since the sovereign debt crisis a decade and a half ago, the ECB has been fully merged with Brussels. Autonomy in Eurozone monetary policy is nonexistent.

During the debt crisis, the ECB intervened massively. Nominal interest rates dropped from over 4% in 2008 to as low as -0.5%, remaining in negative territory for years. Bond purchases and long-term refinancing operations ballooned to around €3 trillion – liquidity that partially displaced private credit. This is one reason the Eurozone economy has relied on credit-financed government demand to stay afloat.

With its anti-fragmentation tools, the ECB secured peripheral bonds regardless of fiscal discipline.

Crisis Never Resolved

The results of this market manipulation are evident: the Euro Club continually expanded national deficits. The disciplining effect of interest rate penalties vanished – the ECB became a state money-printing machine, political control supplanting market discipline.

The rescue operation peaked with Mario Draghi’s legendary "Whatever it takes," signaling that the ECB would guarantee the solvency of heavily indebted member states.

Since then, the ECB has functioned as a backstop, a lender of last resort for all Eurozone countries, many of which have abandoned fiscal responsibility. Draghi’s decision stripped the bond market of its teeth, undermining its role as a control mechanism.

Nonsense “Made by ECB”

Brussels turned the ECB into a money pump for its ideological campaign against free markets and national sovereignty. From financing absurd climate projects to building a European war economy, the ECB monetizes growing debt, with the EU Commission contributing: the upcoming Brussels budget totals roughly €2 trillion, much to be financed through eurobond issuance, relying on the ECB to step in if the market hesitates.

The ECB is far from independent. Few central banks have subordinated themselves to politics as completely. The legacy of the conservative, stability-focused German Bundesbank is gone.

Smoke Screens and Media Spin

European monetary politicization has enabled Brussels’ socialist ecologism to entrench itself despite economic fallout. Manipulated interest rates and state guarantees have produced the largest zombie economy in the world, excepting China’s real estate sector. Scarce resources are diverted to unproductive projects, freezing the Eurozone in stagnation.

Lagarde’s Fed warnings are mere distractions. Europe faces rising sovereign debt pressures, with France on the brink of crisis. ECB tools must be ready, as no one knows when the market will issue the red card.

While the U.S. continues monetary reform, deregulates the economy, and lowers taxes, Europe remains in regulatory paralysis. The ECB perpetuates the socialist debt spiral with ever-new liquidity injections. We are witnessing a slow-motion crash as European policymakers fail to escape their self-imposed ideological trap.

* * * 

About the author: Thomas Kolbe, a graduate economist, has worked for over 25 years as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.

Tyler Durden Tue, 09/02/2025 - 05:45

Novo Shares Gain As Wegovy Shows Big Edge Over Lilly's Tirzepatide In Heart Study  

Novo Nordisk shares rose in Copenhagen trading on Monday after the pharmaceutical giant reported on Sunday that its weight-loss drug Wegovy reduced the risk of heart attack, stroke, or death by 57% compared with tirzepatide, the active ingredient in Eli Lilly's Mounjaro and Zepbound.

The new findings come from a STEER real-world study, which collected evidence from patient experiences at the European Society of Cardiology in Madrid, Spain. The study investigated the risk of major adverse cardiovascular events with Wegovy compared with tirzepatide treatment in people with overweight or obesity and cardiovascular disease. 

"Compared with tirzepatide, Wegovy showed a significant 57% greater risk reduction for heart attack, stroke and cardiovascular-related death or death from any cause, in people with overweight or obesity and CVD, who did not have any gaps in their treatment lasting more than 30 days," Novo wrote in a press release. 

UBS analyst Tricia Wright commented on the results: 

While this was not a randomized controlled trial, Novo said the study adds to growing evidence suggesting that the heart-protective benefits seen with Wegovy are specific to its key ingredient semaglutide and therefore cannot be extended to other GLP-1 drugs, such as tirzepatide. These findings could give a lift to Novo, which has been losing US market share to Zepbound.

These findings could give a lift to Novo, which has been losing U.S. market share to Zepbound.

Novo bulls have been searching - especially Goldman analysts - for a positive news cycle for the pharma giant after shares have tumbled 70% since peaking in June 2024.

Compounding GLP-1 headwind has been a headache for the industry:

• Novo Shares Crash Most On Record After Forecast Slashed On Compounded GLP-1 Headwinds

However, Novo shares have rebounded 26% since bottoming in early August. There has been some positive news flow:

• Novo Shares Gain As Wegovy Wins FDA Approval For Liver Disease

As we've previously mentioned:

For Novo shares to rebound meaningfully, the company must address compounded GLP-1 knockoffs that have flooded the U.S. market, undermining demand and slowing Wegovy's expansion. Novo noted in its earnings release earlier this month that it is "pursuing multiple strategies, including litigation, to protect patients from knockoff 'semaglutide' drugs." Meanwhile, the clock is ticking for HIMS.

Novo's decline must have been a rough ride for Goldman clients after listening to superbull analyst James Quigley. 

Tyler Durden Tue, 09/02/2025 - 04:15

Mohammed Becomes Most Common Name Among Welfare Benefit Recipients In Germany

Authored by Thomas Brooke via Remix News,

New figures released by Germany’s federal government have reshaped the rankings of citizen’s allowance recipients in the country, placing Mohammed and its many spelling variants at the top of the list.

A recent government response to an Alternative for Germany (AfD) inquiry originally suggested that Michael, Andreas, Thomas, and Daniel were the most frequent first names among those receiving the allowance, known locally as Bürgergeld. However, the government’s list had separated different spellings of the same name, resulting in distortions.

AfD lawmaker René Springer requested additional data that consolidated all variations of the same name.

The government’s updated response, obtained by Bild, shows that Mohammed — counted across 19 different spellings and variants such as Mohamed, Muhammad, and Mahamadou — now ranks first with 39,280 entries.

By comparison, Michael (including Michel, Mischa, and Maik) comes second with 24,660 entries, followed by Ahmad (20,660), Andreas (18,420), and Thomas (17,920). Names with fewer spelling variations, such as Andreas and Thomas, lost ground, while Ahmad, which has multiple common versions including Achmet and Amed, rose to third place.

The federal government stressed that first names cannot be used to directly determine nationality, though they undeniably serve as an indicator of native Germans and those of a migration background.

Three Islamic names, Mohammed, Ahmad, and Ali, were included in the top 10 first names of recipients.

At the end of 2024, a total of 5.42 million people in Germany received a citizen’s allowance, including 2.82 million Germans (52 percent) and 2.6 million foreigners (48 percent).

Critics argue that these numbers understate the role of foreign-born individuals, since many migrants are now naturalized German citizens and therefore counted as “German” in the statistics. Bild also reported that nearly half of Germany’s €17.68 billion housing support budget for 2024 went to foreigners.

The debate comes as the Federal Employment Agency continues to advertise welfare benefits to migrants, with parts of its website dedicated to “people from abroad,” promising financial support to cover living expenses.

Germany’s governing CDU/CSU bloc is finally calling for stricter limits on migrant reliance on welfare. Deputy parliamentary leader Mathias Middelberg argued earlier this week that job centers need to do more to integrate Afghans and Syrians into work. “Just 100,000 more people in work instead of relying on the citizen’s allowance could, depending on wage levels, relieve the federal budget in the low single-digit billion range every year,” Middelberg said.

Government figures show that 52.8 percent of Syrians and 46.7 percent of Afghans in Germany receive a citizen’s allowance, while fewer than 40 percent in both groups are in jobs subject to social security contributions.

“We cannot accept that hundreds of thousands of young asylum seekers here in Germany are unemployed for decades,” Middelberg added.

Earlier this month, two Social Democratic Party district administrators in Thuringia also broke with their party’s national leadership by demanding that non-EU migrants, including asylum seekers and recognized refugees, should receive social benefits only as interest-free loans, repayable once they find employment.

Read more here...

Tyler Durden Tue, 09/02/2025 - 03:30

Houthis Target Israeli-Owned Tanker As Retaliation For Slain Prime Minister

In apparent retaliation for massive Israeli strikes which killed the Yemeni Houthi prime minister, Ahmed al-Rahawi, last week - who was the most senior Houthi official to have been slain in the ongoing conflict thus far, among other high ranking officials and commanders - the Houthi military has claimed responsibility for a missile attack on a tanker in the Red Sea on Sunday.

The targeted ship is Israeli-owned and Liberian-flagged, named the Scarlet Ray, according to the maritime security company Ambrey. The United Kingdom Maritime Trade Operations (UKMTO) agency, has disputed the claim, saying the missile missed the vessel.

Scarlet Ray, source: scheepvaartwest

"The crew witnessed a splash in close proximity to their vessel from an unknown projectile and heard a loud bang," UKMTO said. It further stated that the crew are unharmed and that the ship has continued on its voyage.

On Saturday, the Houthis announced that the prime minister and other senor officials had been assassinated, in large daytime strikes on the capital. Israeli intelligence had reportedly been monitoring a top-level meeting in Sanaa in real-time.

According to a description of the attack in Israeli media:

The Iran-backed Houthi terror group said Monday that it had fired a missile at an Israeli-owned tanker in the Red Sea, days after the prime minister of Yemen’s rebel government and several other ministers were killed in an IDF strike on the capital Sanaa.

Houthi military spokesman Brig. Gen. Yahya Saree claimed responsibility for the launch in a prerecorded message aired on al-Masirah, a Houthi-controlled satellite news channel. He alleged the vessel, the Liberian-flagged Scarlet Ray, had ties to Israel.

The ship’s owners, Singapore-based Eastern Pacific Shipping, could not be immediately reached. However, the maritime security firm Ambrey described the ship as fitting the Houthis’ “target profile, as the vessel is publicly Israeli owned.”

The Houthis have by and large respected the months-long US ceasefire declared by President Trump, but have said they will continue to target any Israeli-linked or Israel-bound vessel traversing the Red Sea.

As the US Navy stepped back from regional operations, Washington has pressured the Europeans to step up defense of the vital trade transit waters.

Funeral events were held Monday in Sanaa for the slain prime minster, which saw tens of thousands of Yemenis take to the streets.

UKMTO WARNING 029-25-ATTACK
31 AUG 2025 1730UTChttps://t.co/vMiU6Vsj8c#MaritimeSecurity #MarSec pic.twitter.com/bFgNpOJqSS

— UKMTO Operations Centre (@UK_MTO) August 31, 2025

One top Houthi official told the crowds, "We are facing the strongest intelligence empire in the world, the one that targeted the government – the whole Zionist entity (comprising) the US administration, the Zionist entity, the Zionist Arabs and the spies inside Yemen."

High-ranking officials slain in Israeli strike on Thursday, which was confirmed in a Houthi statement Saturday:

VIDEO | Scenes from Sanaa, Yemen, of the funeral of Yemeni Prime Minister Ahmad Ghaleb Rahwi and his fellow ministers.

Israel assassinated the PM and nearly his entire cabinet. pic.twitter.com/ojOL3WzrIA

— The Cradle (@TheCradleMedia) September 1, 2025

The Houthis are an Iran-aligned movement which has shown resiliency, given that for over a half-decade it was bombed by the Saudi-US-UAE coalition, largely to no effect, and now it is in a war with Israel, and has managed to effectively shut down international transit shipping through the Red Sea.

Tyler Durden Tue, 09/02/2025 - 02:45

China Is Unlikely To Play A Major Role In The Ukrainian Endgame

Authored by Andrew Korybko via Substack,

The most that China is expected to do is deploy peacekeepers together with other countries per a potentially forthcoming UNSC Resolution that would likely see these forces jointly patrol whatever the “Line of Contact” may be and monitor each side’s compliance with the ceasefire or peace treaty.

Axios reported that Putin “mentioned China as one of the potential guarantors” of Ukraine’s security, which was followed by Foreign Minister Sergey Lavrov referencing spring 2022’s draft peace treaty that included China as one alongside the other permanent UNSC members. Zelensky then told reporters that “We don’t need guarantors who don’t help Ukraine, and didn’t help Ukraine at the moment when we really needed it. We need security guarantees only from those countries that are ready to help us.”

China’s participation in this framework would be important for reasons of prestige and international law due to it respectively being an emerging superpower and a permanent UNSC member. Nevertheless, China is unlikely to play a major role in the Ukrainian endgame. For instance, it’s not going to deploy peacekeepers to the Russian side of the frontier with Ukraine to face off against Western ones on the other side, nor will it agree to impose crippling sanctions on Russia if the conflict re-erupts in the future.

The most that China is expected to do is deploy peacekeepers together with other countries per a potentially forthcoming UNSC Resolution that would likely see these forces jointly patrol whatever the “Line of Contact” may be and monitor each side’s compliance with the ceasefire or peace treaty. China has always been neutral towards conflicts in which it’s not a direct participant and therefore can’t afford to be seen as taking anyone’s side in the Ukrainian one’s endgame lest it lose its credibility with others.

In this context, its goals are to:

1) present itself as a force for peace in the largest European conflict since WWII;

2) correspondingly enhance its global prestige through participation in any potentially forthcoming UNSC-approved peacekeeping mission;

3) and reopen its overland trade with Ukraine.

To elaborate on the last point, China and Ukraine used to trade with one another via Russia, but it was obviously impossible to continue doing so since the start of the special operation 3,5 years ago.

China’s interests in resuming the use of this corridor are due to it being the quickest and cheapest route to Ukraine, while Ukraine’s are likely driven by the calculation that Russia might be reluctant to strike projects in which China has invested if the conflict ever re-erupts. The most profitable and strategic ones are probably already promised to Ukraine’s Western patrons, but Kiev might allow Chinese companies (especially state-owned ones) to purchase stakes in them as an “deterrent” to Russia per the aforesaid.

Facilitating the resumption of Chinese-Ukrainian trade is also in Russia’s interests since this assumes that Russian-Ukrainian trade would resume as well. After all, it wouldn’t make sense for the Kremlin to agree to facilitate China’s trade with Ukraine without also being allowed to trade with it too, so this arrangement could be part of a grand compromise for ending the conflict. The EU would benefit for the same reason as Ukraine, but the US might thus be wary of this quid pro quo for precisely that reason.

In any case and regardless of however Chinese-Ukrainian trade is conducted in the future, China is unlikely to play a major role in the Ukrainian endgame since neither the US nor Ukraine want it to, while talk about China taking Russia’s side in this scenario is dispelled by the reality of its neutral foreign policy. China is expected to play some role, but it’ll probably be as part of a UNSC-approved multilateral effort, not anything unilateral. That’s alright for China too since it doesn’t want to do anything major anyhow.

Tyler Durden Tue, 09/02/2025 - 02:00