Welcome back to Friday! Here’s the latest edition of the weekly business wrap.
This past week was all about inflation in America. The consumer price index climbed 0.6 percent, largely thanks to drivers paying over $4 for gasoline. Meanwhile, the producer price index saw a rise of 1.3 percent, reminding us of its past name, the wholesale price index, which feels like it hasn’t been relevant since Jimmy Carter’s presidency. The index for export prices increased due to foreign demand, while import prices also ticked up, but less so, I guess reflecting a certain restraint compared to, say, the French.
Of course, inflation wasn’t the only topic on the radar. The Beige Book got released, and, once more, it revealed that hardly anyone pays attention to it. Honestly, we’ve kind of given up on hoping people will care about anything beige, so this will be the last mention of it here. The Office of the Comptroller of the Currency put out a critical report on debanking, but it seems the financial media tried hard to downplay its significance. In a more futuristic note, Tesla managed to make cars fly—finally giving us a taste of that promised future seen in numerous sequels of The Fast & the Furious. Kevin Warsh, often a bit enigmatic, spoke yet didn’t really address monetary policy direction, and the bond market began to show concern regarding the viability of AI-associated debt in a climate of rising interest rates.
So, before things skyrocket further, let’s dive into what’s been happening!
Overheard This Week
“A few months back, everyone thought oil prices would drop after the Iran conflict ended. Now, I guess, with that war still ongoing, oil seems to be priced to stay high for longer.” — Anonymous Trump administration official.
“You pronounce it AI. Here in the U.S., we’re leaning towards SI.” — Kevin Warsh to IMF Managing Director Kristalina Georgieva.
“The lack of forward guidance isn’t the same as guidance implying no Fed hike.” — Anonymous bond trader.
One Night in Bangkok
Kevin Warsh took a trip into the future this week, although he didn’t share any insights with us. Well, that’s what we think happened—while watching him speak at the IMF meeting in Bangkok on Thursday night, he was actually delivering his address on Friday morning. A friend mentioned the international date line, but really, would President Trump have been okay with the rest of the world jumping ahead while the U.S. lags behind?
Warsh and the bond market are in a peculiar situation now. He’s certainly not focused on providing forward guidance, yet the market seems to treat his silence as if it were guidance of a sort. It’s just become more complex—forward guidance in disguise, if you will.
His speech was conveniently timed as it’s the last we’ll hear from Fed officials before their self-imposed silence ahead of the upcoming meeting. Earlier statements from Fed officials had investors speculating the Fed could hold off on rate increases until later this year. Right before the meeting, futures markets indicated a 72 percent chance the Fed would maintain the current rates this month and a 90 percent likelihood of a rate hike in December.
“I don’t prejudge meetings. I don’t believe in commenting now about what I might do later this year,” Warsh shared from Bangkok. “This marks a new chapter at the Fed, so we’ve moved on from that.”
The market’s interpretation wasn’t about the lack of content regarding potential Fed actions; instead, it took Warsh’s comments as confirmation of existing expectations. The absence of forward guidance somehow morphed into a version of forward guidance, leading to a pricing shift towards an 85 percent chance of maintaining rates in October.
The stakes are high—it’s really almost like inviting Warsh to surprise the market with an unexpected move, which could very well be a rate hike during the October meeting. That possibility is more likely than people assume. Such a move would assert the Fed’s commitment to price stability, particularly in light of this week’s concerning inflation data. It could reduce long-term yields, easing pressures in the housing market and likely alleviating fears regarding AI debt. Most importantly, it would signal that Warsh is indeed serious about moving away from the era of forward guidance. Until the Fed takes unexpected action, there will always be skepticism about that guidance being over.
Up, Up, and Away
The most alarming elements of this week’s inflation reports weren’t just the headline figures. Sure, they were grim—a 0.6 percent rise in CPI this month translates to an annual increase of 8.1 percent, with a 3.7 percent rise from a year ago. The PPI also saw an increase of 1.3 percent, annualizing to 17.4 percent over the past year. The import price index grew by 1.1 percent month-over-month and is up 8.1 percent compared to a year ago.
What’s worse is that inflation appears to have escaped the influence of just oil prices. Import prices excluding fuel moved up 0.7 percent, while CPI for goods excluding food and energy rose 0.3 percent, suggesting an annualized inflation rate of about three percent. In the same vein, core CPI (which also excludes food and energy) climbed by 0.3 percent, with services outside of energy rising by 0.4 percent. Final demand PPI without food and energy jumped by 0.7 percent, and final demand services in PPI increased by 0.8 percent.
The economy managed to cope with the initial oil price shocks pretty well, maintaining competition for consumer spending that kept price hikes in check. But now, there’s clearly no end in sight to the oil price shock—futures prices show oil remaining elevated indefinitely, and that’s starting to seep into the broader economy.
The Beige Book noted this week that “higher oil prices affected all District reports.” No surprise there! And yes, we said we wouldn’t mention the Beige Book again, but you shouldn’t read too much into it being a guiding statement for the recap. That was just a forward-looking statement that shouldn’t be taken too seriously.
Debanking 1.0 Was Crazy
It’s somewhat hard to believe just how extreme cancel culture became during the Biden years. Not only were social media companies censoring content, banning Donald Trump from their platforms, and suppressing ideas that diverged from the White House’s official stance, but many major banks were also cutting off services and funding to conservatives, outspoken Christians, gun sellers and manufacturers, prison companies, and anyone suspected of tarnishing their reputation.
The report from the Office of the Comptroller of the Currency is particularly significant, especially since the left, media, and financial institutions have worked hard to conceal this issue. Numerous journalists have dismissed the concept of debanking as a non-issue. Even after the report, many stories downplayed the significance of its findings. For instance, Bloomberg titled its piece “Nine Large Banks Engaged in So-Called Debanking, OCC Says,” implying it was merely a label rather than a reality. Some articles downplayed serious examples of this cancel culture and included biased “consumer advocates” who claim it’s not widespread. They complained that the report didn’t quantify how often debanking occurred.
The narrative also shifted to one focused on regulatory minutiae instead of the compelling evidence of banks choosing to restrict the politics of the American right.
Imagine for a minute if the OCC had discovered evidence of debanking based on racial minority status, backed by documents showing that individuals from certain minority groups were denied services because it might hurt the bank’s reputation. Would the financial press ignore it because the extent of such practices wasn’t clearly quantified and some advocates dismissed it? Okay, perhaps it’s best not to dwell on that angle too long or you might find your own bank account getting closed.
Regulatory influence certainly played a role here. The notion that bank regulators should mandate institutions to monitor reputational risk was largely a cover for smuggling progressive policies into bank operations. But make no mistake, banks weren’t just following orders. The rules were rigged in favor of a culture of wokeness. Those who firmly aligned with these beliefs advanced within banks, while dissenters were edged out of positions of authority.
People Are Worried the AI Bubble Is Popping
Concerns regarding an AI bubble have emerged this week.
It all seemed to begin in the bond market. The spicy CPI report ignited fears that interest rates might need to climb much higher, impacting the debt-laden AI enterprises. The cost of insuring CoreWeave’s debt surged above 1,140 basis points, suggesting about a 63 percent probability of default over five years, up significantly from around 30 percent the previous year. This company, which you might not have heard of, is sitting on more than $51 billion in debt and obligations, with its bond yield rocketing to nearly 16 percent.
The 20 largest AI and chip firms lost over $1 trillion this week, causing the Nasdaq to experience its first drop in five weeks. Oracle’s credit spread also widened, and a downgrade to junk status would require certain investment-grade-only funds to divest.
Even with the challenging outlook for heavily leveraged AI companies, the S&P 500 remains close to the record it set last week. The Nasdaq finished down 2.14 percent on Friday and lost about 4.5 percent during the week. So, yes, not fantastic, but not a total disaster either.
Overall, though, the fundamentals in the larger AI landscape remain strong. TSMC recently announced its sixth consecutive quarter of record profits, projecting a remarkable 58 percent revenue growth in Q4. CoreWeave boasts a backlog exceeding $100 billion with about two-thirds linked to investment-grade clients, including Microsoft, Meta, and IBM, according to Deutsche Bank analysts. Additionally, Friday’s Fed data revealed a 28.4 percent annual increase in semiconductor output during Q3, with business equipment growing by 6.7 percent over the past year. The San Francisco Fed highlights that real investment in information-processing equipment has surged over 20 percent annually since early 2025, outpacing growth seen in the late 1990s.
Breitbart Business History: The U.S. Navy’s Radio Dominance Plan
When the United States entered World War I, President Woodrow Wilson placed the private and commercial radio stations under Navy control. Secretary of the Navy Josephus Daniels believed they should remain there. In a draft letter to Wilson, he referred to radio as a “natural Government monopoly” that held too much significance for national defense to be left to private entities. Consequently, the Navy ended up in charge of the country’s entire commercial wireless infrastructure.
Congress didn’t agree. It rejected earlier Navy proposals for government ownership and, after the war, turned down attempts to establish a peacetime monopoly. Commercial radio would revert to private control as the country sought to return to normalcy.
Nonetheless, the Navy was unwilling to relinquish control over the airwaves.
The immediate concern focused on a groundbreaking technology from General Electric, the Alexanderson alternator, capable of transmitting radio signals across the Atlantic. It was the cutting-edge technology of its time. The British firm Marconi’s Wireless Telegraph Company and its American subsidiary were working to purchase nearly all of the Alexanderson machines produced by GE, which would have granted Marconi a near monopoly.
With the British already dominating the global undersea cable network, handing them the best American radio technology was alarming for naval officers. Even the fact that the U.S. had recently fought alongside Britain in World War I didn’t seem to reassure Navy wireless operators.
On April 8, 1919, Rear Admiral William H. G. Bullard, the Navy’s communications chief, along with Commander Stanford Hooper, approached GE and urged its executives to block the deal with Marconi. Bullard proposed that GE avoid selling the technology to Marconi and instead establish a new American radio company to rival Marconi. Owen D. Young, the GE executive who would eventually become the first chairman of RCA, later noted this visit marked “the beginning of the Radio Corporation.”
However, GE didn’t start from square one. Instead, it bought American Marconi, a process facilitated by the leverage that GE held over American Marconi’s executives and its British parent company due to its control of Alexanderson technology.
On October 17, 1919, GE officially incorporated RCA in Delaware. While the new company was privately owned, its structure was unique. At least 80 percent of its voting power was reserved for U.S. citizens, and its directors and officers were required to be American citizens. The incorporation also allowed for U.S. government involvement in the company’s administration.
RCA’s founding arrangements went even further. A government representative was permitted to attend shareholder and board meetings to “present and discuss informally” the government’s opinions and interests. President Wilson appointed Bullard—who had helped initiate the entire operation—to this position.
Though Congress had denied the Navy control over American radio, the Navy circumvented this by persuading GE to create RCA and install a Navy officer among its leadership.
