Launch Pad

Power Problems. The use of AI could have some very real-world consequences this winter. There are growing risks of blackouts in the U.S. this winter as rising electricity demand from AI-driven data centers outpaces supply. Power consumption has jumped by 20 gigawatts since last winter, which is roughly the output of 20 nuclear reactors, leaving many regions across the U.S. vulnerable. Experts are warning that these blackouts are likely to take place during extreme cold snaps or polar vortexes, with aging infrastructure, reduced winter solar output, and uncertain gas supplies not making things easier. The dramatic increase in data center power usage is adding to ongoing reliability concerns in historically at-risk regions like Texas and New England. 

Reverse stock splits have risen to a record this year, highlighting the growing pressure on small-cap companies struggling to maintain exchange listings. A total of 288 reverse splits have taken place this year, with nearly 80% of these firms having a market cap below $250 million. This method, typically used to consolidate shares and lift stock prices above minimum listing requirements, highlights the widening divide in equity markets, as weaker small caps try to stay afloat. Small caps now make up just 1.2% of total U.S. market, near a 100-year low and far below the long-term average of 3.6%, with AI-linked and large tech companies having powered 75% of the S&P 500’s returns over the last 3 years. 

Ownership of U.S. Treasuries from foreign owners remained near record levels in September at $9.25 trillion, slightly below August’s all-time high. These elevated levels highlight the continued global appetite for U.S. debt despite concerns about Trump’s trade and foreign policy stance. Japan increased its holdings to $1.19 trillion, levels not seen in more than three years, which have contributed to yen weakness as investors favour Treasuries over domestic bonds. Not everyone is as enthusiastic though, with the U.K., the second-largest holder, reducing its position by $39.3 billion, and China’s holdings little changed at about $700 billion. Despite talks of countries wanting to distance themselves from the U.S., there is little evidence of foreign investors moving on from U.S. assets, with Treasury officials continuing to highlight strong international demand. 

Poking the bear. After a scorching post-election run, Bitcoin has fallen nearly 30% from its peak of $126K, briefly falling below $90K and leaving some new investors underwater. Its quick decline has even caused it to lag bonds and T-bills YTD. Once seen as a growth asset, inflation hedge, and diversifier, Bitcoin has not delivered on many of those promises this year, snapping back during global risk-off periods. Despite supportive policy (Trump seems to have a second job as a crypto salesman) and strong early ETF inflows, ongoing ETF outflows and weak macro sentiment have weighed on performance. While Bitcoin still trades well above what it was pre-U.S. election, and has historically rebounded from major drawdowns, investors aren’t clamoring back in just yet, with options markets pricing less than a 5% chance of the cryptocurrency reaching record highs by year-end. 

UK inflation eased in October for the first time since May, falling to 3.6% from 3.8%, in line with expectations and giving the government some relief ahead of next week’s budget. The easing also increases the odds of a December Bank of England rate cut, although some officials may need more evidence of cooling before fully committing to easing at its next meeting. Markets reacted with modest sterling weakness and lower gilt yields following the news. Economists argue that softer inflation, weakening growth, and an anticipated fiscal tightening create conditions for a December cut, though it remains uncertain given the BOE’s close 5–4 vote against easing in November and concerns about solid wage growth. Services inflation, a key BOE focus, fell to 4.5%, while core CPI fell to 3.4%. Still, food inflation unexpectedly rose to 4.9%, complicating the picture. 

We can all agree that your morning coffee is getting more expensive, but this is ridiculous. A café in Dubai cafe is now serving the world’s most expensive coffee at $980 USD a cup, using ultra-rare Panamanian Nido 7 Geisha beans that cost the owners $600,000 for just 20 kilograms. The coffee is described as floral, fruity, and honey-like (so likely a little tastier than Folgers), is less about the taste and more a reflection on Dubai’s reputation for extravagant experiences and breaking luxury records. While the price has sparked both shock and fascination, demand from those with the cash remains strong. 


Diversion: The Perfect Shot

Japanese bonds extended losses after results of a 20-year debt sale signaled that investors are still cautious about extra supply ahead of Prime Minister Sanae Takaichi’s first economic package. The 20-year yield rose to 2.815%, its highest since 1999, while yields on 30- and 40-year debt also edged higher. The bid-to-cover ratio, an indication of demand, was 3.28 versus 3.56 at last month’s sale. Fiscal concerns are pressuring the bond market. A group in the ruling Liberal Democratic Party has urged Takaichi to craft a larger-than-expected extra budget worth about ¥25 trillion ($161 billion) to fund the spending that was a key part of her electoral campaign. Japanese GDP data out yesterday also supported Takaichi’s case for an ambitious stimulus package. The new premier is up against a multitude of tests from the market after only about a month in office. The yen’s weakness has prompted debate over a possible intervention, while her comments on Taiwan have triggered tensions with China.