London Irvine Report: Special Update 04/10/2025 AI Debt Bubble. The Soybean Bailout.

Baltic Dry Index. 1901 -08 Brent Crude 64.53

Spot Gold 3887 U S 2 Year Yield 3.58 +0.03

US Federal Debt. 37.561 trillion

US GDP 30.307 trillion

A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank.

Ron Paul

The good news this weekend, the Gaza atrocity may be ending. Hamas appears to be surrendering.

The bad news this weekend, the GREAT AI bubble may be ending. Even Goldie is getting cold feet.

As the USA heads into a Columbus holiday weekend, selling depressed some leading technology stocks. A pause or the smart money trying to get out?

S&P 500 posts winning week, but Friday rally fizzles: Live updates

Updated Fri, Oct 3 2025 4:25 PM EDT

The S&P 500 retreated from a record on Friday but held on to solid weekly gains despite a U.S. government shutdown dragging on for a third day.

The broad market index closed little changed, ticking up just 0.01% at 6,715.79, while the Nasdaq Composite declined 0.28% to settle at 22,780.51. The Dow Jones Industrial Average outperformed, trading higher by 238.56 points, or 0.51%, to finish at 46,758.28. The Russell 2000 also popped 0.72% to close at 2,476.18. All four benchmarks had hit all-time highs earlier in the session.

Stocks were knocked down a bit in afternoon trading by declines in key technology names like Palantir Technologies, Tesla and Nvidia. Palantir led the S&P 500′s pullback, falling 7.5%, while Tesla and Nvidia dropped more than 1% and almost 1%, respectively. The CBOE Volatility Index spiked, signaling some investors were scrambling to buy some protection against a future S&P 500 decline in the form of put contracts.

Still, the three leading indexes saw a positive weekly finish. The broad market S&P 500 rose around 1.1% on the week, along with the 30-stock Dow, while the tech-heavy Nasdaq increased 1.3%. The small-cap Russell has jumped nearly 2% in the period.

Investors have been overlooking anxieties surrounding the government shutdown, which entered its third day Friday. While the stoppage has exacerbated underlying concerns this year about macroeconomic and policy headwinds, inflation risks and a slowing labor market, investors expect it to be short-lived, thereby limiting potential hits to the U.S. economy. Those on Wall Street also believe that the shutdown won’t stop the momentum in the artificial intelligence trade. Shutdowns have not been market-moving events in the past.

The shutdown has led to an economic data blackout, and the Labor Department’s pause on virtually all activity has blocked the Friday release of the September nonfarm payrolls report. Although that removes a factor that could lend pressure to stocks, it lessens the amount of economic data the Federal Reserve can take into account for its interest rate decision at its October meeting. Markets largely expect the central bank will lower its key interest rate by a quarter percentage point then, per the CME FedWatch tool.

Adding to ongoing concerns regarding the jobs market, President Donald Trump has threatened massive layoffs and said Thursday that the Democrats have given him an “unprecedented opportunity” to cut federal agencies. Treasury Secretary Scott Bessent also told CNBC Thursday that the current lapse in federal funding could lead to “a hit to the GDP, a hit to growth and a hit to working America.” The Congressional Budget Office estimates 750,000 federal workers will be furloughed each day.

Their remarks come a day after private payrolls posted their biggest decline since March 2023 in September, according to ADP. Wednesday’s report serves as yet another sign that the labor market is weakening, and some believe that the state of the labor market combined with the shutdown bolster the case for the Fed to cut.

“We view September’s mixed, private-sourced substitutes for the Labor Department’s delayed jobs report as soft enough to justify another interest-rate cut by the Federal Reserve at the October 29 FOMC meeting,” said Jennifer Timmerman, senior investment strategy analyst at Wells Fargo Investment Institute. “Prospects for further rate cutting by the Fed, reinforced by the yellow flag for the economy raised by the latest jobs data, has cemented a rally in stocks and left the yield on the benchmark 10-year Treasury note low enough, at 4.11%, to lift the S&P 500 to a fresh all-time high.”

Stock market today: Live updates

Goldman boss David Solomon warns of a stock market drawdown: ‘People won’t feel good’

Published Fri, Oct 3 2025 8:01 AM EDT Updated Fri, Oct 3 2025 11:17 AM EDT

Stock markets are due a “drawdown” in the next year or two after years of being propelled to record highs by an AI frenzy, according to Goldman Sachs CEO David Solomon.

“Markets run in cycles, and whenever we’ve historically had a significant acceleration in a new technology that creates a lot of capital formation, and therefore lots of interesting new companies around it, you generally see the market run ahead of the potential ... there are going to be winners and losers,” he said at Italian Tech Week in Turin, Italy, on Friday.

Solomon pointed to the mass adoption of the internet in the late 1990s and early 2000s, which led to the emergence of some of the world’s largest companies — but also saw investors lose money to what became known as the “dotcom bubble.”

“You’re going to see a similar phenomenon here,” he said. “I wouldn’t be surprised if in the next 12 to 24 months, we see a drawdown with respect to equity markets ... I think that there will be a lot of capital that’s deployed that will turn out to not deliver returns, and when that happens, people won’t feel good.”

An AI boom has gripped global markets in recent years, with a slew of new technologies, multibillion-dollar deals and the continued rise of ChatGPT-developer OpenAI. It’s seen investors bet big on the tech and pour capital into stocks such as Microsoft, Alphabet, Palantir and Nvidia

The buzz around AI has helped to push indexes on Wall Street and beyond to record highs, even as the major U.S. averages were dented earlier this year by President Donald Trump’s trade policies. However, as investors have continued to seek out opportunities in AI, concerns have been raised about the possibility of a bubble bursting somewhere down the line.

“I’m not going to use the word bubble, because I don’t know, I don’t know what the path will be, but I do know people are out on the risk curve because they’re excited,” Solomon said Friday.

“And when [investors are] excited, they tend to think about the good things that can go right, and they diminish the things you should be skeptical about that can go wrong ... There will be a reset, there will be a check at some point, there will be a drawdown. The extent of that will depend on how long this [bull run] goes,” he added.

Goldman Sachs CEO David Solomon warns stock market drawdown is coming

1 big thing: A big sign of an AI bubble starts to appear

October 03, 2025

Debt is the canary in the coal mine for market bubbles. Housing debt fueled the global financial crisis. Corporate debt led to dotcom bust. Now, the tech companies driving today's bull market are quietly levering up, sometimes through private lenders that make their debt less visible to shareholders.

Why it matters: That debt — and how it is getting structured — is "almost an acknowledgement that this is getting out of hand," Dario Perkins, managing director of global macro at TS Lombard, tells Axios.

What they're saying: Regarding returns on AI expenditures, the Big Tech firms "say they don't care whether the investment has any return, because they're in a race…Surely that in itself is a red flag," Perkins says.

He sees two major issues: increased leverage to fund costly AI infrastructure and few opportunities to make money once that infrastructure is built and paid for with debt.

Zoom out: Big Tech is turning to private debt markets and special purpose vehicles. The catch? That kind of borrowing doesn't have to be reflected on balance sheets.

"SPVs mean companies like Meta do not need to show the debt as their debt," Perkins writes in a note to clients. He likens today's financing tactics to the subprime era, when firms shifted risk off their books to reassure investors.
Meta is raising $29 billion via private capital for its AI data center buildout.
Other tech giants are tapping the public market for debt. Oracle recently issued $18 billion in debt to fund its AI and infrastructure expansion.

Yes, but: Plenty of strategists have reminded Axios of the old Keynesian adage that "the market can stay irrational longer than you can stay solvent."

In other words, this tech-driven bull market could still have legs to create more wealth before the bubble bursts. Perkins, however, isn't convinced.
"I wouldn't touch this stuff now," Perkins says, adding that comparing this market with the dotcom bubble, "we're much closer to 2000 than 1995."

Between the lines: Why are tech companies spending this much to win the AI race if the bubble risk is so prescient?

The market is rewarding them even if it "makes no economic sense to spend at this level because there's no way they can recoup the value of the capital spending," investor Paul Kedrosky explains on the Plain English podcast.
Kedrosky is also watching how companies are moving financing off the balance sheet: "That for me is a reflection of not wanting the credit rating agencies to look at what they're spending."

Axios MarketsMore

In other news, tariff wars aren’t so easy to win after all. Who knew?

Trump making plans to send billions in cash bailouts to farmers with taxpayer money

The president has also said he wants to use direct tariff revenue for the payments, but that could trigger a major fight in Congress.

By Meredith Lee Hill 10/02/2025 03:00 PM EDT

The Trump administration is planning to roll out the first tranche of bailout payments for farmers in the coming weeks, likely using billions of dollars in funding from an internal USDA account, according to three people with direct knowledge of the matter.

But it won’t be enough: USDA’s Commodity Credit Corporation fund — which President Donald Trump previously tapped to provide $28 billion in farm aid during his first-term trade war with China — has just $4 billion left in the account. Trump officials, including those at the Treasury Department, are looking at how to tap tariff receipts or other funding to supplement the payments without triggering a messy fight in Congress.

The timing of the actual aid rollout is also tricky given that it’s unlikely to happen or even be possible during the ongoing government shutdown that’s shuttered vast swaths of the Agriculture Department.

Trump officials are still working on estimates of how big the first tranche of aid will be, according to the three people, who were granted anonymity to share private details. But the president has been posting his promises to aid American soybean farmers on social media in recent days.

Hill Republicans have been pushing Agriculture Secretary Brooke Rollins and other Trump officials for weeks to do something to aid farmers reeling from high input costs and the president’s tariffs, which have cut off American soybean farmers’ key markets in China as Beijing retaliates.

Trump has said he would use tariff revenue to provide cash bailouts to farmers, but Congress would likely need to vote to authorize such a move, triggering a major fight between Republicans and Democrats amid already dire government spending conversations.

GOP lawmakers could also move to refill the internal USDA fund in their government funding fight later this fall, but that too will be a battle with Democrats.

Hill Republicans have been quietly working on their own proposal to find additional funding for the farm bailouts, according to four other people with direct knowledge of the matter. Some Republicans estimate they will eventually need to provide $35 billion to $50 billion in aid to farmers hit by Trump’s tariffs.

Trump making plans to send billions in cash bailouts to farmers with taxpayer money - POLITICO

Global Inflation/Stagflation/Recession Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.

OBR hands Rachel Reeves first damning pre-Budget report on UK economy

Friday 03 October 2025 8:00 am | Updated: Friday 03 October 2025 10:27 am

The Office for Budget Responsibility (OBR) has handed Chancellor Rachel Reeves its first evaluation of the state of the UK economy and crippled public finances, setting policy discussions about likely £30bn tax rises and possible savings in motion.

The OBR’s Budget Responsibility Committee, which consists of the economists Richard Hughes, David Miles and Tom Josephs, are expected to warn the Chancellor that the UK’s outlook is significantly worse than assumed in March.

Its downgrades for productivity and revisions on calculations for supply-side effects of policy are expected to contribute to a £30bn hole in public finances.

Higher debt interest payments – due to 30-year gilt yields rising by over 40 basis points since the last Autumn Budget – and U-turns on welfare savings made at the Spring Statement are likely to add to costs faced by Reeves.

In a report published in July, the OBR said it had overestimated growth forecasts by 0.7 percentage points over a five-year horizon and underestimated borrowing by as much as 3.1 per cent of GDP.

It said turbulence in the global economy in the last few years had added greater uncertainty to its forecasts but the signs suggest the OBR will take a harsher view of the future of UK growth.

Labour MPs criticise OBR

In previous years, the OBR has re-evaluated its inflation measurements and considered changes to the effect of public investment on output in the economy.

But Labour MPs have now widely decried the fiscal watchdog’s decision to alter modelling of its productivity forecasts.

Labour Growth Group’s Chris Curtis suggested at a fringe event at the Labour Party conference that the OBR had chosen to do productivity changes now, as opposed to doing them when Jeremy Hunt was Chancellor, for “political reasons”.

The sense of angst felt across the Labour Party – whether it is due to what some perceive to be the OBR’s outsized powers or whether politicians hold some grievances against its procedural approach – is partly shared by Reeves and Prime Minister Keir Starmer.

In an interview with The Times last week, Reeves said: “They are choosing this moment to make those revisions. That’s a challenge for me.

“But I’m not going to duck that challenge. I will respond to it because it is important that I can give that confidence that we’ll continue to provide economic stability.”

OBR hands Rachel Reeves first pre-Budget report on UK economy

Bosses’ inflation expectations highest in two years amid employment freeze

Thursday 02 October 2025 5:43 pm

Fears that inflation will remain well above the Bank of England’s two per cent target intensified on Thursday, after a closely watched survey of businesses revealed bosses plan to raise prices at their fastest rate since the height of the cost-of-living crisis.

British businesses also have the weakest hiring intentions since 2020 with firms expecting to keep employment steady over the next 12 months, the first time since the three months to November 2020 that they had not expected to increase staffing.

Finance chiefs polled by the Bank of England said they expect to hike their prices by 3.7 per cent over the coming year, up from 3.5 per cent in August, in a move that could quash any remaining chance of there being another cut to Bank Rate in 2025.

Inflation expectations also remained elevated, with bosses on the Bank’s Decision Maker Panel (DMP) predicting prices to rise across the UK economy by 3.4 per cent, the highest reading since December 2023.

The findings mirror the results of the central bank’s recent survey of households’ inflation expectations, which, driven by recent price spikes in groceries and regulated industries, is now at its highest rate in several years.

Both surveys will add credence to recent arguments made by some of the Monetary Policy Committee’s more hawkish members, who have warned that the inflation outlook looks stickier than officials had previously anticipated.

Inflation fears stalk UK

This week, external member Catherine Mann cited household expectations for inflation hitting 3.8 per cent when she called for interest rates to remain at four per cent for longer, before eventually making a larger cut to reboot the sluggish economy when the time was right.

“I prefer a longer hold… and make a bigger cut when you do to make it very clear that this is not in response to the financial markets or other things,” she told a Bloomberg event. “This is really about the UK economy.”

Bosses' inflation expectations highest in two years amid employment freeze

China Goes on Offense

Beijing’s Plans to Exploit American Retreat

Jeffrey Prescott and Julian Gewirtz September 29, 2025

A great unanswered question of the second Trump administration has been how its outright rejection of the existing global order would affect China’s international strategy. U.S. Secretary of State Marco Rubio has called this order both “obsolete” and “a weapon being used against” the United States, and in his speech at the United Nations on September 23, President Donald Trump pilloried the “globalist” institution for “creating new problems for us to solve.” In the early months of this year, Beijing’s response to Washington’s attacks on the international order seemed mostly cautious and measured. China traded tit-for-tat tariffs with the United States, but it otherwise remained content to sit back and accrue benefits from Trump’s alienation of U.S. allies and withdrawal from international institutions.

That period of caution is now over. Beijing has decided on a much more ambitious course, putting its plans on vivid display at a September meeting of the Shanghai Cooperation Organization. Hosting the once sleepy regional economic and security body, Chinese leader Xi Jinping clasped hands with Russian President Vladimir Putin and Indian Prime Minister Narendra Modi and met with 18 other leaders from across the Eurasian continent. A few days later, flanked by Putin and North Korean leader Kim Jong Un, Xi presided over a massive military parade in Beijing to show off China’s fast-growing arsenal. Trump’s comment about seeing the summitry on TV—“They were hoping I was watching, and I was watching”—inadvertently revealed the precise position in which China hoped to place the United States: the American president, so often the prime mover of global politics, had become a spectator on the sidelines of a changing world.

Xi aims to establish China as the fulcrum of an emerging multipolar world, and he is advancing a new, more active diplomatic strategy to realize that goal. Rather than force the United States out of its leading position in the international system or overturn the existing order, China is exploiting Trump’s rapid, willing abdication of Washington’s role. And China is building up its own power and prestige within existing institutions, seeking to shift their centers of gravity irrevocably toward Beijing. If this gambit succeeds, it will transform the international order from the inside out, placing China at center stage and undermining U.S. influence in ways that future American administrations may find difficult to reverse.

WORLD BUILDING

Not too long ago, foreign policy analysts might have shrugged off the pageantry of the China summit. After all, meetings of the Shanghai Cooperation Organization are often heavy on optics and light on substance. Disagreements among the group’s key members, such as a long-running border dispute between China and India, have tended to outweigh their areas of commonality. Indeed, some commentators and U.S. officials dismissed the recent Chinese-hosted events as “performative,” “for show,” and merely a “photo op.”

Eight months into Trump’s second term, this reading is optimistic at best. It discounts the extent to which global reactions to Trump’s actions are reshaping the world. The international order that the United States built and maintained for decades is coming to an end, and what follows is up for grabs. Many countries are competing for influence, and short-term, transactional dealmaking rather than long-term cooperation is becoming the new norm, ushering in a phase that one of us called “mercenary multipolarity” in Foreign Affairs. The United States and China remain the two most powerful countries, but others, such as India and Russia, as well as the European Union, are significant players with their own agendas. And as U.S. alliances fracture under Trump, rivals of the United States are collaborating in increasingly meaningful ways.

Yet with the ultimate shape of this new order still undefined, Xi sees a window of opportunity to forge a China-centric world without directly taking on the United States by moving assertively into areas where Trump’s “America first” policies leave openings. This project extends well beyond the optics of gathering global leaders in Chinese cities. While the U.S. president feuded with the leaders of Brazil and India, Xi addressed a virtual BRICS meeting hosted by Brasilia on the topic of “resisting protectionism” and welcomed Modi to China to shore up ties with these two key powers. While Trump imposes tariffs on much of the world and eliminates U.S. foreign assistance, Xi is courting the leaders of the developing world: Beijing announced cuts to Chinese tariffs on African goods in June and claimed in September that it would bolster efforts to reform the World Trade Organization to benefit developing countries’ economic growth.

China Goes on Offense: Beijing’s Plans to Exploit American Retreat

Technology Update.

With events happening fast in the development of solar power and graphene, I’ve added this section.

A Trillion-Ton Threat Hangs Over Critical Minerals

September 30, 2025 at 10:00 PM GMT+1

You might think the business of mining is digging up valuable minerals. In fact, it’s almost the opposite.

Most of the rock that miners blast, shovel and truck out of the ground is useless waste — first the overburden of worthless material that has to be dug away to get to the ore body, then the tailings left over when the ore has been ground up and processed to extract its useful elements. To produce a teaspoonful of gold these days, you often need to remove an Eiffel Tower’s-worth of material from the earth.

Managing that growing mountain of dross — likely more than a trillion metric tons at present, and forecast to double by 2050 — is one of the biggest obstacles to getting our hands on the critical minerals the world will need over the coming decades. The collapse of mine walls and waste heaps can bury or trap workers, send toxic minerals into waterways, and block access to precious deposits. A warming planet is bringing heavier downpours, along with more volatile cycles of dry and wet spells, further destabilizing the fragile equilibrium that holds such piles of rock together.

The world’s second-biggest copper mine saw a brutal illustration of this reality recently. At Grasberg, a vast pit atop a mountain in the Indonesian half of New Guinea island, 800,000 tons of mud and rock swept through underground tunnels on Sept. 8, killing two people and leaving five missing. Activity at the mine, which produced about 3.5% of the world’s copper and 1.8% of its gold last year, has been halted and won’t be back to normal until 2027, operator Freeport McMoRan Inc. said last week.

It’s still far too early to understand the exact causes of this disaster, but one culprit is clear: water. Grasberg is one of the wettest spots on the planet, with one access road near the mine sometimes receiving more than 12 meters of rainfall a year. Though the underground cavern where the flow of wet material happened is well below the bottom of the 550-meter-deep open pit, rain inevitably permeates far below the surface. Once there, it can force open microscopic cracks, fracturing the rock. The process is only accentuated by the often freezing temperatures of the Papuan highlands.

Miners aren’t ignorant of this process. Because it’s such a high-risk activity, vast ingenuity and expense is spent on understanding and monitoring the slopes that hold waste rock and mine walls in place. Looked at one way, the 45 failures of tailings dams during the 2010s — the largest number of such accidents in any decade since the 1970s — are testament to the inadequacy of our safety systems. When you consider the vastly greater volumes of material getting discarded now, however, it’s a miracle the figure isn’t any worse.

A Trillion-Ton Threat Hangs Over Critical Minerals - Bloomberg

Next, the world global debt clock. Nations debts to GDP compared.

World Debt Clocks (usdebtclock.org)

Exponent Calculator

Enter values into any two of the input fields to solve for the third.

Exponent Calculator

This weekend’s music diversion. Boccherini’s famous fandango. Approx. 9 minutes.

Boccherini-Quintetto n. 4 G 448 - Fandango (III-parte II)

Boccherini-Quintetto n. 4 G 448 - Fandango (III-parte II)

Next, how to beat the stock casinos. Approx. 30 minutes.

What Happens If Someone Solves the Trillion Dollar Equation

What Happens If Someone Solves the Trillion Dollar Equation | Watch