Keep Walking.
Biotech Barbie.
“If I could only open one thing each morning it would be John Ellis’s News Items newsletter.” — Larry Summers, President Emeritus of Harvard University and former Secretary of the Treasury of the United States.
1. Insurers shopping for better ratings on their private credit assets are creating a “looming systemic risk” to global finance, the chair of UBS has warned. Speaking at the Hong Kong Monetary Authority’s Global Financial Leaders’ Investment Summit on Tuesday, Colm Kelleher said the insurance industry, especially in the US, was engaging in “ratings arbitrage” akin to what banks and other institutions did with subprime loans before the 2008 financial crisis. Kelleher joins a growing chorus of voices pointing to risks in the multitrillion dollar insurance industry, including its holdings of illiquid private credit loans and opaque disclosures. “What you’re seeing now is a massive growth in small rating agencies ticking the box for compliance of investment,” said Kelleher, who stressed that regulators were failing to get a handle on the industry even as they were pushing for faster economic growth. “If you look at the insurance business there is a looming systemic risk coming through because of lack of effective regulation,” he said. (Sources: ft.com, brettonwoods.org)
2. The Wall Street Journal:
A string of alleged frauds by corporate borrowers is spurring a reckoning across Wall Street, sending bankers and investors scrambling to prevent future blowups.
Lenders are increasing due diligence and demanding a longer history of financial data from companies. Some are inserting conditions that permit them to do more frequent checkups before agreeing to make loans. A group of the biggest names in banking, investment management and accounting have formed a task force that will take a deeper look at the nature of the problem and how to protect investors.
The frauds that have emerged so far, which involve small to midsize companies in sectors such as autos and telecommunications, haven’t sparked widespread trouble in the market or economy. But they have generated fallout for both regional banks and Wall Street giants such as JPMorgan Chase and BlackRock, and the string of revelations has made it harder to dismiss any one case as an isolated event. (Source: wsj.com)
3. The new management team leading First Brands through bankruptcy filed a complaint against the auto supplier’s founder and former Chief Executive Patrick James, accusing him of fraudulently securing billions of dollars of financing and enriching himself by misappropriating funds. Monday’s complaint alleges that James caused First Brands to incur at least $2.3 billion in accounts-receivable financing based, at least in significant part, on nonexistent or doctored invoices. It also accuses James of engaging in transactions involving special-purpose vehicles that double-pledged collateral to obtain financing. (Source: wsj.com. Italics mine.)
The financing package stitched together for Meta’s humongous Hyperion data center campus in Louisiana made Alphaville curious about just how much energy the new AI infrastructure will consume if it all comes online.
After all, massive new projects are being announced almost every week, in what even KKR’s digital infrastructure lead called a “bragawatts” phenomenon in MainFT on Monday.
The latest example is OpenAI on Thursday revealing plans for a 1+ gigawatt data centre hub in Michigan. Together with previously announced “Stargate” projects this brings the total to over 8 gigawatts — close to the 10 target it floated earlier this year. This will cost over $450 billion over the next three years, according to the company that spends more on marketing and employee stock options than it makes in revenue.
So how many data center projects have now been started or announced? Which ones will actually happen and which ones are fantasy? As Barclays noted last week, tracking “what is real vs. speculative is a full-time job”, but the bank has forced some poor sell-side plebs to at least tally all the announcements and collect some rudimentary details.
So what is the total so far? With OpenAI’s Michigan project they now total 46 gigawatts of computing power. Apologies for the virtual shouting, but this seems a bit mad.
These centers will cost $2.5 trillion to build, according to Barclays, to service an industry that still doesn’t turn a profit. But the maddest bit arguably is how much energy they will require once completed. Using Barclays’ 1.2 “Power Use Effectiveness” ratio, all these data centres — if they are all completed — would need 55.2 gigawatts of electricity to function at full capacity.
If we also use Barclays’ rule of thumb that 1 gigawatt can power over 800,000 American homes, it means that these data centres will consume as much energy as 44.2 million households — almost three times California’s entire housing stock.* (Source: ft.com)
5. An experimental reactor developed in the Gobi Desert by the Chinese Academy of Sciences’ Shanghai Institute of Applied Physics has achieved thorium-to-uranium fuel conversion, paving the way for an almost endless supply of nuclear energy. The achievement makes the 2 megawatt liquid-fueled thorium-based molten salt reactor (TMSR) the only operating example of the technology in the world to have successfully loaded and used thorium fuel. According to the academy, the experiment has provided initial proof of the technical feasibility of using thorium resources in molten salt reactor systems and represents a major leap forward for the technology. It is the first time in the world that scientists have been able to acquire experimental data on thorium operations from inside a molten salt reactor, according to a report by Science and Technology Daily. (Source: scmp.com)
6. Researchers at Stanford and SLAC have developed an innovative iron-based material for energy storage in batteries, achieving a capacity that previously seemed unattainable. The discovery involves making an iron-based cathode material repeatedly donate and accept five electrons instead of the usual two or three, significantly increasing rechargeable energy storage potential. (Source: news.stanford.edu)
7. Two startups aiming to produce an American supply of rare-earth magnets have sealed a $1.4 billion deal with the U.S. government and private investors. It is the latest sign that the Trump administration is moving to build out a domestic rare-earths supply chain and thwart China’s sector dominance—and willing to pay large sums for it. Led by Vulcan Elements, the deal involves a $620 million loan from the Defense Department’s Office of Strategic Capital to build and operate a U.S. magnet facility capable of producing 10,000 metric tons of magnets each year, the company said Monday. The Commerce Department is chipping in $50 million and private investors are putting in another $550 million. Rare-earth magnets are essential for the construction of motors needed in AI data centers, electric vehicles and consumer electronics as well as missiles, drones, satellites, ships, jet fighters and other defense systems. China has long dominated the supply chain, from mining to processing. (Source: wsj.com)
8. A West Coast biotech entrepreneur says he’s secured $30 million to form a public-benefit company to study how to safely create genetically edited babies, marking the largest known investment into the taboo technology. The new company, called Preventive, is being formed to research so-called “heritable genome editing,” in which the DNA of embryos would be modified by correcting harmful mutations or installing beneficial genes. The goal would be to prevent disease. Preventive was founded by the gene-editing scientist Lucas Harrington, who described his plans yesterday in a blog post announcing the venture. Preventive, he said, will not rush to try out the technique but instead will dedicate itself “to rigorously researching whether heritable genome editing can be done safely and responsibly.” (Source: technologyreview.com)
9. Cathy Tie left university to found her first biotechnology company at the age of 18. In the 11 years since, she has launched several more. Her first company helped genetic-testing firms to interpret their results; her second provides digital health-care services. Her latest venture, which announced some of its first key hires on 30 October, veers out of the mainstream. Tie, who has called herself Biotech Barbie, sometimes refers to her latest company as the Manhattan Project — the name used for the US effort to develop an atomic bomb in the 1940s — and now focuses her entrepreneurial ambitions on a controversial goal: altering the genome of human embryos to prevent genetic disorders. “We have a duty to patients with incurable, debilitating diseases,” says Tie. “A majority of Americans are in support of this technology.” (Source: nature.com)
10. Antarctica is far more than just a bucket-list destination for travelers and a home for penguins. It’s a veritable time machine, holding evidence from millions of years of Earth’s climatic history deep within the ice. Scientists working with the Center for Oldest Ice Exploration (COLDEX) have collected the oldest directly dated ice cores ever drilled: 6 million years old. In studying the air and water from the samples, they glimpsed the climate of the ancient Earth, when the planet was warmer than it is today and sea levels were higher — and discovered evidence of a long-term cooling period. (Source: space.com. Italics mine.)
11. Bloomberg:
The Arctic tundra — specifically, the frozen layer known as permafrost — is a crucial part of the Earth’s delicate climate balance. Over thousands of years, this permanently frozen band has locked away 1.4 trillion tons of carbon, roughly twice what’s currently in the atmosphere. Frozen, that carbon poses no threat. But after millennia of stability, global warming is raising the risk that the store turns into a source of emissions instead.
A January study found that, taking into account the impact of bigger and more frequent wildfires, the Arctic sink has already turned into a driver of climate change. Now, experts are racing to figure out if rising saltwater will be yet another source of damage to the permafrost.
The northern part of the planet is warming four times faster than the rest of the world, and any further changes to the landscape risk kicking off chain reactions that would put more carbon in the atmosphere. That would contribute to more intense heat waves, fiercer fires and dangerous storms around the world. (Sources: bloomberg.com, nature.com. Italics mine)
12. Scientists have documented what they say is the quickest retreat of an Antarctic glacier in modern history. Hektoria glacier on the Antarctic Peninsula shortened by 25 kilometers in just 15 months, collapsing at speeds up to 10 times faster than current records. Naomi Ochwat at the University of Colorado Boulder and her colleagues attribute the rapid shrinkage to a vulnerability in Hektoria’s configuration, which saw its thinning trunk withdraw across a flat seabed area known as an ice plain. This triggered a runaway surge in iceberg production. The researchers warn that the collapse mechanism could threaten other Antarctic glaciers, with serious implications for sea level rise. (Source: newscientist.com. Italics mine.)
13. According to Ray Dalio, there is now so much variation in the U.S. economy that it can no longer be looked at “as a whole.” The dynamic is growing increasingly complex as the nation is becoming more reliant on its most productive industry: technology. While Wall Street has begun to mutter the world “bubble” in relation to valuations, Dalio warns that more widely, the prospects of the majority of workers are now tied to those in a relatively small sector. “I think the issue is very much that you can’t look at the U.S. as a whole nowadays,” the Bridgewater Associates founder said at the Fortune Global Forum in Riyadh on Monday (10/27). He added: “You have to look at everything in terms of the very, very big differences and how those differences are handled.” He explained: “If you’re looking at, let’s say, the AI world, and really what amounts to about 3 million people—1% of the population—leading, and then … the 5% or 10% around them, you have one world that the whole world is dependent on. “And then you have the bottom 60% of the population.” (Source: fortune.com)
14. Gerry Baker:
New York is the ultimate singular political geography. We can never draw too much of a wider inference from the strange social and cultural ecology of the place. But while the sense of alienation and frustration at the steady vanishing of opportunity may be more intense here, it is felt elsewhere too.
Mr. Mamdani’s radicalism won’t restore the good times. His ideology is one more fantasy. But the national political opportunity for someone—Democrat, Republican or independent—is real. (Source: wsj.com)
15. The Trump administration yesterday said it will partially fund SNAP after two judges issued rulings requiring it to keep the nation’s largest food aid program running. The U.S. Department of Agriculture, which oversees the Supplemental Nutrition Assistance Program, had planned to freeze payments starting Nov. 1 because it said it could no longer keep funding it during the federal government shutdown. The program serves about 1 in 8 Americans and is a major piece of the nation’s social safety net. It costs more than $8 billion per month nationally. The government says an emergency fund it will use has $4.65 billion — enough to cover about half the normal benefits. (Source: statnews.com)
16. Keep walking. Older people with early-stage Alzheimer’s disease who took more than 5,000 steps a day saw slower cognitive decline than less active peers, according to a pioneering 14-year study on how exercise may help lower dementia risk. The more mobile adults also showed a smaller build-up of proteins in the brain that are a signature of Alzheimer’s, suggesting their walking habits might help curb the condition’s advance. The research is a sophisticated effort to blend different types of data to better understand how to combat a disease that is expected to afflict millions more people each year due to rising life expectancies. (Source: ft.com)
17. For two decades, Mark Grebner, 72, has been a pioneer in assembling vast databases that can generate a single number to predict which party a voter is most likely to support. As campaigning for Tuesday’s election entered the final stretch, dozens of candidates for mayor and city councils across Michigan were using Mr. Grebner’s political scoring to target persuadable voters by knocking on their doors and bombarding them with mailings. With a few keystrokes, Mr. Grebner can call up the score of just about any adult in Michigan. The rapper Marshall Bruce Mathers III, better known as Eminem, scores as 58 percent likely to vote Democratic. Gov. Gretchen Whitmer comes up as 99 percent Democratic. William Clay Ford Jr., the executive chairman of the Ford Motor Company, scores 86 percent Republican. “If you give me a name of someone you know in Michigan, I could appall you by how much information I have about them,” he (says). (Source: nytimes.com)
Quick Links: China started separating its economy from the West years ago. U.S. leverage in bilateral negotiations has declined accordingly. On the other hand, maybe it hasn’t declined accordingly. On yet another hand, maybe it has. Europe’s role reversal: The problem economies are now farther north. Daily Dave!: Is Goldman Sachs CEO David Solomon’s DJ-ing career getting scratched out?
Financialization Links: Fed’s Cook signals December rate cut is not a foregone conclusion. The real economy continues to deteriorate while asset prices soar. Asian markets’ reliance on AI boom raises ‘bubble’ fears. Private equity investor body sounds alarm over rush of retail money. Animal spirits have returned to M&A. Grumpy Norwegians: NBIM voted against Elon Musk’s proposed $1 trillion Tesla pay package. Private developers edge back into China’s land auctions after long retreat.
Political Links: Today is Election Day in states, cities and towns across (some parts of) America. Five big questions for Trump and Democrats on Election Day 2025. Trump backs Cuomo, threatens to cut funds for New York City if Mamdani wins mayoral race. What began over the summer in Texas has spiraled into a nationwide redistricting arms race. Interesting interview with UChicago’s Moon Duchin: Why the challenge of truly representative democracy is so complex. Pew Research’s survey on the electorate’s dim views of both major political parties is worth reading. Gallup: Concerns about crime in the U.S. have declined. Stunning poll shows Labour and Tories behind the GREENS for the first time. How religious voters react to the upheaval of artificial intelligence could have big implications in elections. Inside the billionaire network shaping MAGA’s post-Trump future. Its view: an “aristocracy” is needed to move the country forward. Report: Donors to Trump’s White House ballroom have $279 billion in federal contracts.
Science/Technology Links: George Gilder: The post-microchip era, with data centers in a box of wafer scale processors, is coming. America, not China, should lead the way. Is China about to win the AI race? China offers tech giants cheap power to boost domestic AI chips. AI cell models could transform biomedicine—if they work as promised. Apple Watch data teamed with AI reveals heart damage. A new Washington Post investigation reveals where climate change has supercharged the movement of moisture through the skies. Use of GLP-1 injectables for weight loss has more than doubled since early 2024.
War: Here comes Russia’s first serial submarine to carry nuclear-powered giga-torpedoes. Russian forces continue to advance in the Pokrovsk direction and appear to be operating with increasing comfort within Pokrovsk itself. More on the Ukraine war here. How the US is preparing a military staging ground near Venezuela. China’s Chinook-style heavy-duty helicopter drone makes debut with successful test flight.