Memorial Day Weekend Reading
2025 #18 (May 24)
Markets / Econ
The MSR Market Hasn’t Been This Hot in Decades
Meanwhile, a senior executive at a leading mortgage servicing rights brokerage firm described the timing as ideal: “Demand is enormous and multiples are at 25-year highs.” According to the executive, selling now is a “smart” move.
Private Funds Are Turning to Complex Bonds to Tackle Cash Crunch
“You’re taking illiquid, opaque assets, slicing them up, and selling tranches with theoretical diversification and little transparency,” said Ludovic Phalippou, a Professor of Financial Economics at University of Oxford. “That’s exactly what we saw with CDOs,” he said, referring to the collateralized debt obligations that helped trigger the global financial crisis in 2008.
There are safeguards built into the CFO structure. Such deals generally include a first-loss equity portion which takes the first hit in the event of a default or decline in value, and this is typically held onto by the manager themselves. CFOs may also have less single-issuer risk than vehicles like collateralized loan obligations, where troubles for one big borrower can ripple through the market.
Related: The Delusion of Private Equity IRRs—by Ludovic Phalippou on the inanity of PE IRRs.
Pompliano-Led Crypto-Focused SPAC Gains 7 % on Nasdaq After Upsized IPO
The Supreme Court Is Just Making Stuff Up About the Fed. Trump can’t fire members of the Fed for now, but the rationale is super sketchy, so likely either the court will back away from letting the President fire these folks without cause, or he will be able to fire Powell as well, eventually.
What we have here, then, is the Supreme Court trying to side-step the fact that there is not basis for distinguishing the Board of Governors of the Federal Reserve System from the NLRB or MSPB for purposes of for-cause removal. In order to claim a distinction, the Court has had to blur three separate legal entities together, pretending one is another, and then invent a history on which it was not briefed and for which there is no scholarly support. There's no nice way to say this: the Court is just making shit up.
Fiscal Space and Rising Yields
There’s a long history of speculative bubbles in markets, but there’s bubbles in policy making too. Perhaps the biggest of these policy bubbles is the idea that fiscal space - especially in advanced economies - is infinite.
Related: The Japanese Government Bond Market Is in Trouble
Our budget situation is not even sustainable if nothing bad happens going forward. I suppose it’s possible that some sort of AI miracle will rescue us, just as its theoretically possible for someone drunk and high on cocaine to put on a blindfold and drive 90 mph down the highway without hitting another car. But I don’t think it makes sense to assume that we’ll be as lucky as the Indiana Pacers.
The Bond Vigilantes Are Stirring: The U.S. Is Nearing the Fiscal Inflection Point
Back in the 1980s, economists Thomas Sargent and Neil Wallace described the “Unpleasant Monetarist Arithmetic,” and it’s just as relevant today.
If fiscal authorities refuse to consolidate deficits, the central bank eventually becomes the only institution capable of preventing a sovereign debt crisis—by monetizing the debt. But that solution comes with a heavy price: higher inflation, currency depreciation, and the erosion of the central bank’s credibility.
The Budget and the Fiscal Doom Loop
Rate Outlook and the Coming Fiscal Crisis
The Limits of Consumption Deepening: Why Consuming More Makes Us Poorer
The reality is that economic productivity is not organically related to the volume of monetary transactions taking place. The statistics we use to measure productivity assume that there is a relationship between these two things, and this may have been the case in the old consumption widening economy of the postwar period. But in the late capitalist economy, dominated by consumption deepening and rent extraction, this assumption simply does not hold.
Better analysis of consumption deepening can help to explain the growing disconnect between the rising living standards suggested by economic statistics and the increasingly widespread perceptions of material decline among Western electorates. Although it may be possible to increase GDP by transforming ever-more aspects of life into monetizable consumption, we may be well past the point at which further consumption deepening detracts from actual consumer “utility” or human flourishing.
At the same time, goods that once composed far less of a person’s overall consumption basket—like health care, education, and housing—are sucking up much of the income that has been freed up by actual improvements in material conditions that were arrived at through the process of consumption widening. The reason for this is not because the quality of these goods has risen dramatically but rather because the markets for these goods have become heavily financialized and bureaucratized, thereby creating a massive sector of the economy that is based almost entirely on rent extraction.
The Foreign Returns of Nations: A Puzzle. Anglos for the win.
Forcing Bank Deposits to Subsidize Stablecoins: the GENIUS Act
If the GENIUS Act becomes the law, we're in for a FUBAR situation when a stablecoin issuer ends up insolvent. Even more concerning, if a bank custodian for a stablecoin issuer's reserves ends up insolvent, the claims of the stablecoin investors will come ahead of the bank depositors. That's right. Crypto comes ahead of ma-and-pa.
Crypto High-Rollers Go Big on Bodyguards to Deter Kidnappers
Even before Coinbase Global Inc. disclosed that hackers had stolen the home addresses and account balances of its customers, Jethro Pijlman was seeing an uptick in interest from concerned clients with large crypto holdings who were looking for bodyguards and other forms of protection.
Foreign/Military
China’s Past, America’s Present: Revisiting Wang Hui
If global capitalism is the predator, then China needs a strong state to protect it, but if the state and associated elites are the predator, then maybe capitalism can save them. In this narrative, it can be difficult to disentangle America and its government, liberal world order, and the like from capitalism itself. If China’s comparative advantage is labor and manufacturing, America’s comparative advantage is capital. And yet, some Chinese new leftists, who follow Trump and Vance closely, see the Americans as the biggest victims of the process. How can you say “Yankee, go home” in Boston? Multinational capitalism has no homeland; Manhattan is the mountain; the capitalists are the vultures who have made their nests there. Maybe someday, they will fly somewhere else.
China’s Superstition Boom in a Godless State
It is one of history’s more striking ironies: the People’s Republic of China, an officially atheist, Marxist-Leninist regime that has long sought to suppress all forms of organized religion, now finds itself caught in a tidal wave of superstition. Post-pandemic, what began as a trickle has become a torrent—an uncontrolled spread of fortune-telling, lucky crystals, and spiritual nonsense, growing in the vacuum left by institutional faith and spread further by a hyper-connected internet society.
In this strange mix, AI—the symbol of modern thinking—has been used to automate some of the least logical parts of human behavior. Users don’t care how the systems work. They just want a clean, digital prophecy. The same technology that should help us face reality is now mass-producing fantasy—on a huge scale.
How China co-opted the green movement Development for Beijing, degrowth for us
Rising empires require collaborators to expand their influence and win over adversaries. In this respect, China and other anti-Western regimes increasingly count on green activists, investors, and media to advance their interests. Overall, the greens see China as “pivotal” in the global green-energy transition, as states Sustainability Magazine.
Banxia Cuts China Bank Exposure as Bad Loan Fears Mount
“The bad loan risk of the entire banking system is also rising rapidly,” Banxia wrote, citing mounting concerns over falling property prices eroding the collateral value underpinning trillions of yuan in loans. The hedge fund estimates that prices for existing homes have already fallen nearly 25% since June 2021, and could decline another 5% by year-end—matching average down payments and raising the specter of widespread defaults and foreclosures.
Make Moscow Pay: The Case for Seizing Russian Assets to Fund Ukraine’s Defense. If I were Europe, I would wait until I have some of these new German tanks built.
Seizure is proportionate to the harm Russia has wrought, and because Russia has a legal obligation to pay Ukraine for damages from the war, seizure would be permissible in that it would set off Ukraine’s claim to reparations.
Starmer Peddles Disinformation to Sell Chagos Surrender. Weirdly counterproductive for the UK/US, presumably there is something either corrupt and/or secret driving it.
Fog of War: The Biggest Challenge for Naval Laser Weapons
The physics are simple but unforgiving. As a laser beam travels through the atmosphere, its energy is degraded by scattering, absorption, and turbulence. Water vapor, dust, salt aerosols, and temperature fluctuations all contribute to bending, diffusing, or bleeding off energy from the beam. According to the report, even a small shift in the laser’s wavelength — from 3.7886 to 3.7902 microns — cut beam transmission through sea-level air from 90% to 50% over 10 kilometers. That’s a major performance cliff triggered by what amounts to a rounding error.
A Military Force Turned Upside Down
About 650,000 civilian contractors provide services to our military. These are not the workers building ships and aircraft. Instead, service contractors perform everyday tasks (e.g., maintain computers, deliver supplies, train the troops, etc.)
Service contractors are employed not as individuals but under massive contracts labelled communications or logistic support or some such. The Pentagon doesn’t know who the individuals are, let alone how to audit performance or value added. These contracts total about $270 billion, a quarter of the entire Defense budget.
Each service contractor annually costs about $430,000.
UFOs Are Swarming U.S. Military Zones—And One Just Crashed Into a Fighter Jet
The collision happened in January when an F-16 Viper jet struck what officials later described as an “orange-white uncrewed aerial system,” or UAS. The FAA confirmed the object hit the plane’s canopy mid-flight. That’s the transparent bubble that protects the pilot’s face. No word yet on how damaged it was, but if it sounds wild, just know this: it was one of four separate drone encounters reported that day.
Politics / Culture
Trump Family’s Net Worth Soars on Deals in Return to Presidency. If You Love What You Do, You’ll Never Work A Day In Your Life.
Understanding America Across 15 Types of Communities (Part One)
Nihilistic Violent Extremism and American Counterterrorism. Nihilists! Fuck me. I mean, say what you want about the tenets of National Socialism, Dude, at least it's an ethos
In court documents, the Federal Bureau of Investigation (FBI) deployed a new term of art to describe Casap: “Nihilistic Violent Extremist.” It was only the second time such language had been used, indicating a potential sea change in how federal agencies conceptualize and investigate domestic terrorism cases.
‘The purpose of a system is what it does. The purpose of Iraq and Afghanistan is not and was not to make its people prosperous. The purpose of Harvard is not to produce research or to benefit its students. The purpose of Hezbollah Lebanon is Islamic Jihad. The purpose of Hezbollah Harvard is anti-white racism. Without a regime change in leadership, the purpose of Hezbollah Harvard will continue to be anti-white racism.
40 Years Wandering in the "Norms" Desert?
CRINGE CORNER
Elites killed my pro-growth agenda. Trump can’t let them stop his. | Liz Truss, Washington Post
Who knew Truss was a Trumpian populist? Apparently, the Conservative Party “had already got rid of Boris Johnson with a view to installing the former Goldman Sachs banker Rishi Sunak. I got in the way of their plans.” Bonus points for listing “embrace bitcoin” as a key to “liberating the supply side of the economy.”
Ours Is a System of Fraud, Swindles and Corruption
I submit that the United States is in the firm grip of the single-minded few focused solely on maximizing their gains and distributing costs and losses to others by any means available. The social and political restraints that placed modest limits on the aggregation of power and wealth into the hands of the few have crumbled, and this structural collapse has been hidden behind flimsy billboards hyping the latest in distractions: AI, tariffs, stablecoins, Rich Mom fashions, etc.
These flimsy distractions are about to be blown over by the windstorm of recession and social disorder as the American households clinging on to the fantasy of The American Dream as all the costs and losses are dumped on them as the gains flow to the top 10% finally throw in the towel on the status quo.
It doesn't matter that CoreWeave quite literally does not have enough money for its capital expenditures and lost over $300m in the last quarter because its year-over-year growth was 420%. It doesn't matter that it has October loan payments that will crush the life out of the company either. These narratives are fed to the media knowing that the media will print them, because thinking too hard about a stock would mean the Business Idiot had to think also, and that is not why they are in this business.
The "AI trade" is the Business Idiot's nirvana — a fascination for a managerial class that long since gave up any kind of meaningful contribution to the bottom line, as moving away from the fundamental creation of value as a business naturally leads to the same kind of specious value that one finds from generative AI.
Larry David’s Notes from a “Curb Your Enthusiasm” Production Meeting
SUSIE ESSMAN (actor): Jeff, you took the words right out of my mouth. But what I find most surprising, which isn’t talked about very much, is how handsome you are, Larry. Your comedy is so brilliant that people overlook the fact that there’s a stunning man behind it. I have no doubt that you could’ve been a big movie star, if you chose to do that. Fortunately for us and the world, you chose comedy. I think I speak for everyone here when I say how lucky we are to be in the presence of such a genius.
L.D.: Well, I’ve always felt that my looks were underrated. Sometimes I’ll catch a reflection in a store window and say to myself, “What a gorgeous man!” And then I realize it’s me. Crazy! O.K., let’s hear from J.B.
J. B. SMOOVE (actor): Man, you have no idea how much you’ve done for me. I used to hate white people—and then I met you. How can I hate white people if you’re white? You are a good, white man. And, if I were a white man, I’d want to be you. You are the Martin Luther King of comedy.
L.D.: I was a great admirer of his. And many people have told me he would’ve been a big fan of mine. Laura?
Science / Health/Tech
To review (I), Regeneron’s purchase has provided them with the motherlode of data to prioritize drug targets. This greatly increases the odds of success picking drugs that will work when they go to trial. With further growth in and use of the platform, that’ll only become more true. This supersedes their existing sequencing efforts.
To review (II), Regeneron has acquired the ability to do target discovery better than anyone else is currently capable of doing. There is precedent for these methods working, but few have had the requisite data and collection platforms to make this possible at scale. Regeneron got those things and we know they want to use them.
To review (III), Regeneron has acquired the data and platform that, when used properly, will allow them to upend the traditional process of drug development, letting them do it more effectively and cheaply, while avoiding costly missteps. They’ll also be able to ascertain whether most side effect reports are real or erroneous, allowing them to provide cover for their drugs when the public inevitably overreacts to potentially false information, like that GLP-1RAs cause higher bodyfat percentages or that ezetimibe causes cancer.
To review (IV), Regeneron has positioned themselves in an opportune way to start taking existing drugs and getting them approved for alternative indications that can be highly lucrative to pursue. They can also use this sort of data to provide off-label prescription indications and vetting for doctors and other providers, if they so wish. Doing that can lead to very large increases in prescriptions, as will likely be the case when GLP-1RA generics arrive for diabetes and get prescribed off-label for obesity.
Mitochondria Are More Than Powerhouses—They’re the Motherboard of the Cell. FYI—Mitochondria love creatine.
Perhaps the most remarkable aspect of the mitochondrial collective, however, is that mitochondria from different parts of the body talk to one another, using hormones as their language. Mitochondria produce the steroid hormones we use for sustaining and reproducing life. Cortisol, the hormone that increases blood glucose levels to fuel the stress response, is made in the mitochondria of the adrenal glands, which sit on top of the kidneys. Testosterone, estrogen and progesterone are synthesized mainly by mitochondria in the reproductive organs. Interestingly, brain mitochondria have receptors to sense both stress and sex hormones. So we have a population of mitochondria in the adrenal glands that signal directly, via the blood, to mitochondria in the brain.
The key to life and health may lie in how easily energy flows through your mitochondria with each breath you take. So next time you skip that appealing sugary treat, go outside for a stroll, hit the gym or decide to spend time with someone you care about, know that you are supporting your mitochondria. Keeping energy flowing through your mitochondrial collective may be the key to good health and a meaningful life.
Sleep Need Reduction Therapies
There are several interesting areas for reducing sleep need, but I’m going to tuck most of them in the appendix and focus on the one I find most interesting, Orexin (aka hypocretin).
Since their discovery, orexin peptides and their receptors have been linked to wakefulness, appetite, addiction, executive function, and positive affect. That energy I felt after a night of sleep deprivation? Orexin. That energy you feel after a run? Orexin. The connection between activity and appetite makes sense in the context of our earlier discussion. The more active and awake you are the more calories you burn, so your appetite should increase.
You should be able to go to the doctor of your choice, not just the clinic that your insurance company owns. You should be able to go to the pharmacy of your choice, not just CVS. It should be illegal for CVS to be in charge of paying pharmacies while BEING the biggest pharmacy, and United Health to be in charge of paying doctors while employing more than 100,000 doctors. We need to Break Up Big Medicine. If you agree, go to breakupbigmedicine.com and join my fight.
This essay cuts through optimization noise to reveal the biological bedrock. Your body operates in binary states: adaptation/maintenance or deterioration. I'll outline three non-negotiable requirements to prevent decay:
—Consistent Mechanical Loading
—Metabolically Sound Nutrition
—Circadian Integrity
Montana’s ‘Groundbreaking’ New Law Opens the Door to Experimental Longevity Therapies
The new bill establishes a formal licensing framework for healthcare facilities to become experimental treatment centers. These centers can recommend and administer nearly any experimental drug manufactured within Montana, provided it has passed Phase 1 trials.
How Japan Invented Modern Shipbuilding
When Japan passed the UK as the world’s largest commercial shipbuilder in 1956, it was building around 30% of the world’s gross tonnage. By 1970, that fraction had risen to nearly 50%. And as world demand for ships continued to skyrocket in the ‘60s and early ‘70s (accelerated by the Suez Canal closing again in 1967, Japan’s shipbuilding output increased enormously. By 1973, Japan was building over 17 million gross tons of cargo ships a year, nearly as much as the 19 million tons of Liberty Ships the US built over the entire course of WWII.