Bernard Montag

"Donkeys live a long time."

[Bernard Montag @ePoolcleaner]

Wall St. Journal (Housing): The market shift has been stark in dollar terms. At the end of 2022, around 10% of unpaid principal balances were on mortgages with rates of 5% or higher, according to ICE. As of this July, 5%-plus mortgages represented more than 40% of unpaid balances. Today, rising yields mean that home buyers who had to borrow at higher rates will have to wait a while longer to refinance and enjoy lower monthly payments. The shift also has investment implications. A much bigger portion of the mortgage market is now eager to refinance if rates fall and will be put off from doing so by rising rates. That is a crucial dynamic for investors in mortgage-backed securities, or MBS.

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Wall St. Journal (GDP): The Atlanta Fed projects third quarter real GDP growth at 4.4%

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(Interest Rates): In 1997, when Greenspan hiked rates, interest rates and the money supply were tied together because the Fed operated under a system of scarce reserves. Now, with abundant reserves, a rate hike will not directly influence the money supply in the same way. If rates rise, but the money supply grows, the rate hike will have less impact on inflation than investors (and the Fed) seem to think

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Wall St. Journal (China’s Economy): This month, Beijing announced it would pump roughly 360 billion yuan, about $54 billion, into some of its largest banks and insurers. What struck me was that instead of flowing to the weakest ones, the money is being funneled into the system’s strongest institutions, like the Industrial & Commercial Bank of China and China Life Insurance. And when the plan was unveiled, bank and insurer shares in China fell rather than rose. And the machinery is under visible strain: banks’ net interest margins—the gap between what they earn on loans and pay out on deposits—have sunk to record lows, leaving less room to absorb the next round of losses.

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Wall St. Journal (U.S. Missile Supply): A new report this week by the Defense Department’s inspector general says the Iran war “has resulted in strategic inventory shortfalls and revealed industrial base bottlenecks for munitions resupply.”

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New York Times (S.S.R.I Medication): Let me say, to be quite honest, we still don’t know what depression is. Bedard: Or exactly how these drugs work ….What is the right amount of prescribing of these medications is not something, I don’t think, anybody has an answer to right now when it comes to children. (Note: This excerpt is from a psychiatrist and primary care doctor. It is an excerpt from a lengthy discussion transcribed from a New York Times podcast)

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New York Times (A.I. & U.S/China): The agenda of the May 2024 meeting was crystal clear to both sides because our presidents had agreed to it: Focus on the risks of advanced A.I. systems and the potential for safety cooperation. Yet Chinese officials steered talks away from the potential risks of A.I. systems for hours. They even demurred from explaining their domestic A.I. regulations — despite having regulators in the room. The Chinese government touts the global adoption of its open models, but Chinese models do not currently match U.S. models in safety performance that matters — thwarting access to the most dangerous capabilities. Its companies rarely disclose these risks and say almost nothing about signs that their models, too, might act recklessly beyond human control.

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New York Times (Energy): The Strategic Petroleum Reserve is at its lowest level since 1982

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Wall St. Journal (Canada & E.U.): Canada’s Prime Minister Mark Carney has instructed his special envoy to Europe to scope out the most ambitious possibilities short of full membership in the EU or its common market, according to people familiar with the matter. The details are still being sketched by technical working groups for what the prime minister has told his aides will be the reorienting of an economy and a society that for half a century has been dominated by the U.S. There are hurdles though. Countries whose firms have full access to the bloc’s single market pay into the EU budget, accept its workers and follow its regulations. Moreover, Europe would be hard-pressed to substitute for the southbound trade once heralded by Nafta, with an economy growing at half the pace of America’s. Ten European countries have yet to ratify a previous trade agreement with Canada reached a decade ago.

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New York Times (Energy): Storage levels among the 38 members that make up the Organization for Economic Cooperation and Development have dropped to their lowest levels in decades, according to the U.S. Energy Information Administration. Qatar, a leading exporter of liquefied natural gas, is expected to see its economy shrink by 8.6 percent this year, according to the International Monetary Fund. Saudi Arabia’s economy shrank by 4.8 percent in the second quarter compared with the previous year.

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Wall St. Journal (Iran): Food inflation rose to 128% in August, according to Iran’s official statistics office.

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New York Times (Canadian Tariffs): Canadian tariffs on $20 billion worth of U.S. goods came into effect on Tuesday, deepening the trade war between the two countries. Canada is the only country other than China to implement countertariffs against the United States. Prime Minister Carney has also worked to tighten Canada’s relationships with Asian countries, including South Korea and Japan, and part of his infrastructure push at home aims to increase exports to Asia from Canada’s West Coast.

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Wall St. Journal (Bonds): Mortgages. Student loans. Corporate bonds—interest rates on all forms of debt are linked closely to the yield on America’s 10-year Treasury note, which is now on the brink of 5% for just the second time since the 2008-09 financial crisis.

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New York Times (Sec. of Defense & Transparency): The Pentagon was recently caught surreptitiously employing conservative media influencers who reliably defend Sec. of Defense Pete Hegseth online.

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· New York Times (Sec. of Defense & Transparency): The Pentagon was recently caught surreptitiously employing conservative media influencers who reliably defend Sec. of Defense Pete Hegseth online

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· Dallas Morning News (Reading, Speaking, & Tech): A recent study looked at nearly two decades of ambient recordings of people speaking in the United States, Europe, Australia and Mexico. The finding is troubling. Adults over the age of 25 are using 314 fewer words per day. Younger people are using 451 fewer words. The authors suggest that more is going on, such as “structural changes in how our society congregates and communicates.”

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New York Times: Dr. Bengio, the Godfather of A.I., is an adviser to Model Evaluation and Threat Research, one of the nonprofits that helped investigate the Hugging Face hack. METR did a great job, but its investigation was voluntary — if OpenAI didn’t feel like disclosing certain information, METR couldn’t force it to do so. Dr. Bengio thinks the entire procedure needs to be codified into law. “We need a formal incident-reporting obligation, right?” he said. “You have to, like, actually share the information with the government.” ….OpenAI’s safety culture may be broken In fact, the same week that the hack began, OpenAI announced it was reorganizing its safety team and parting ways with Johannes Heidecke, its head of safety systems. There were two other personnel changes: Chloé Bakalar, OpenAI’s head of ethics, left the company less than a year after joining, and Dylan Scandinaro is no longer in his role as OpenAI’s head of preparedness.

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· Wall St. Journal (A.I.’s Researchers Resign): Coxon—an AI researcher who quit Anthropic-- Pachocki and Amodei joined more than 1,000 AI researchers across the industry who recently signed a statement urging global government coordination on a system to slow AI development if a brake pedal is needed to control models capable of improving on their own. There are no federal AI regulations, and the Trump administration has given priority to a light-touch approach to maximize the economic benefits of AI, an environment critics say could lead to massive cyberattacks or other harms. Anthropic uses an employee Slack channel to hold discussions about the powerful capabilities of their models, Coxon said, describing it as a reflection of how much influence AI companies have over the industry’s development. “It’s kind of insane that it has to happen on the MacBooks of some engineers living in San Francisco instead of a bunker in the desert like where they were doing the Manhattan Project,” Coxon said.

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· New York Times (Vance Gets Commanders’ Direct Assessment): Vice President JD Vance took the unusual step over the spring and summer of calling U.S. military commanders in the Middle East, Europe and Asia directly, seeking their unvarnished assessments of the Iran war, according to current and former officials. Vance wanted the commanders’ individual judgments, in their own words, before they were consolidated into a Pentagon view. One question: how the transfer of weapons to the Middle East would affect their ability to deter China, Russia and North Korea. They were most worried about their depleted stocks of Patriot interceptors, the backbone of their air defenses. By late spring, one theater was down to fewer than 100 of them. The war had also exhausted the theater’s supplies of the Army Tactical Missile Systems, which can reach 190 miles, along with stores of the Precision Strike Missiles, which were meant to replace them

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· Wall St. Journal (Crypto, Witkoff, and the UAE): Steve Witkoff, President Trump’s Middle East envoy, reported earning more than $100 million from the entity that owns his stake in World Liberty Financial. Witkoff co-founded World Liberty, a cryptocurrency company, with Trump and his family members in 2024. Its token, WLFI, has plunged in value since it became publicly tradeable last fall. Sheikh Tahnoon bin Zayed Al Nahyan, the United Arab Emirates’ national security adviser, last year backed a $500 million investment into World Liberty in exchange for a 49% stake. The White House has said that Witkoff divested from World Liberty and doesn’t participate in official matters that could affect his finances. A person familiar with Tahnoon’s investment previously told the Journal that the investment wasn’t discussed with Trump during due diligence or afterward. Ethics experts have said it is unprecedented for a foreign government official to invest in a company backed by an incoming president and one of his top envoys. Witkoff, since his appointment as Middle East envoy in November 2024, has played a key role in the U.S. negotiations over a Gaza ceasefire, Russia’s war against Ukraine, the Iran conflict and other matters. Wikoff has met repeatedly with Tahnoon in his role as envoy.