US Bonds Crisis

Everyone is panicking about the US bond market. Here is thirty years of data on the thing they are panicking about.  

Weekly energy update

Crude

Cheap oil isn't coming back anytime soon.

Yes, I use AI

I use AI to write. I use it to research, to draft, to code, and to argue with. This essay included.

I expect that within a few years the disclosure will read oddly, the way it would read oddly if I told you I had used a pen. Or a spreadsheet. Or a search engine. Tools stop being remarkable once everyone has them, and the announcement stops being a confession and becomes a tic. We are not there yet, so here is the confession.

Privatisation of Government Businesses, Services and Financing

1. Scope and definitions

What the word covers

Privatisation, at its broadest, is the transfer of ownership, financing or delivery of a government function into private hands. Four distinct transactions travel under that one word.

• An asset sale transfers ownership of a government business.

• Outsourcing keeps public funding and public responsibility but contracts delivery to someone else.

• Contestability makes a government provider compete against private providers rather than necessarily replacing it. Think of it as optional outsourcing.

• Private finance brings private capital into public infrastructure while ownership of the service stays public. These are sometimes called public-private partnerships (PPPs).

Weekly Energy Update

Refined product

We are seeing the diesel (gasoil) price rise relative to petrol (gasoline). The refinery crack spreads for diesel and jet fuel are also increasing. These must ultimately flow through to Australian prices.

Weekly Energy Update.

Australian terminal gate prices

The Good, the Bad and the Unknowable: The US Economy and the AI Buildout

With apologies to Sergio Leone and Clint Eastwood.

Figures current to 7 August 2026, including the July employment report released that morning.

This paper is general information only. It is not financial or investment advice. It does not take account of any person’s objectives, financial situation or needs, and should not be relied on in making an investment decision. The author is not a licensed financial adviser. Figures are drawn from public sources, are current only to the date above, and may contain errors.

Introduction

As we approach the frothy end of the business cycle, there are growing voices predicting a crash, some within months, others within one to three years. Some see a shallow recession like the dot-com crash of 2000, while others see the deep trauma of another 2008 Great Financial Crisis. The purpose of this paper is to allay fears of an immediate catastrophic crash. The US economy is currently healthy, and the danger signs of 2007-08 do not appear to be present.

That last claim carries one significant qualification, and it is why this paper has three parts rather than two. The risk that most resembles 2008 has not disappeared. It has moved out of the banks and into private credit, where nobody can price it.

This paper looks only at the United States, because that is where the AI buildout and its risks sit. The five hyperscalers, the chip designers, the bond market funding the whole thing and the private credit funds and insurers increasingly financing it are American, and the electricity constraint binds in Virginia, Ohio and Texas. The frontier labs are mostly but not all American. For everyone else, including Australia, the exposure is second-hand and runs through four channels: equity markets, where the top ten US names are 41% of the S&P 500 and sit inside almost every global index fund and superannuation balanced option; commodity and capital goods demand; the price of AI services themselves; and the overflow of the buildout itself.

In short, the argument runs as follows. The strength of the US economy makes a deep, GFC-style recession unlikely (the good). The arithmetic of the AI buildout makes disappointing returns on much of that capital investment likely (the bad). And the private credit funds and insurers increasingly funding the buildout are the ones who will absorb those disappointing returns, and who will at some point stop financing the next project (the unknowable). That withdrawal of finance, rather than any single spectacular failure, is the most plausible route from an investment disappointment to a slower economy, and at some point, more likely than not, to a shallow recession. President Trump's trade and immigration policy and the war in Iran bear on the same question and are outside this paper’s scope.