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Amid an escalating war that appears to get farther from any hope of a ceasefire, let alone peace, late on Sunday the WSJ reported that Vladimir Putin has proposed that he, President Trump and Chinese leader Xi Jinping meet next month to talk about Ukraine in an attempt to negotiate an end to the four-year conflict that would favor Moscow.

Citing people familiar with the discussions, the WSJ notes that the plan represents an effort by Putin to capitalize on warming ties between Trump and the Russian leader that have alarmed Ukraine and its allies in Washington and Europe. Such a summit - one notably without the involvement of Zelensky who appears to have terminally alienated Trump in recent days - would be "unprecedented and send alarm bells ringing in European capitals and beyond."

According to a former Russian intelligence officer briefed on the matter, Putin floated the idea in an Oct. 9 phone call with Trump. That conversation also produced a deal for the U.S. to buy Russian diesel fuel and facilitate its sale on the global market. Kremlin spokesman Dmitry Peskov confirmed that discussions were taking place over a potential meeting. 

“There is no clear understanding yet regarding the meeting itself or its potential agenda, although all three parties acknowledge the hypothetical possibility of such a meeting taking place,” he told The Wall Street Journal.

A senior US official said that while Trump hadn’t agreed to such a summit, he said that the president could be receptive to the idea, given his desire to fulfill a campaign promise to settle the war. Trump had said it would be finished on “day one” of his new term, but he is now approaching nearly two years in office. 

The Kremlin has suggested holding the trilateral dialogue on the sidelines of the coming Asia-Pacific Economic Cooperation summit, the people familiar with discussions said. That gathering takes place on Nov. 18 and 19 in Shenzhen, the southern Chinese tech hub. 

A potential three-way dialogue on Chinese soil would mark a big step for Xi in his efforts to elevate China’s role as a diplomatic power broker, said analysts who study China. Russian officials proposed the idea to Beijing through diplomatic channels and the Chinese side has indicated it wouldn’t object if Trump is on board.

“China wants to be seen as the pivot of the great powers, and potentially as a mediator between the U.S. and Russia,” said Yun Sun, director of the China program at the Stimson Center, a Washington think tank.

While Putin had unsuccessfully proposed a trilateral summit to both Trump and Xi on previous occasions, this time, however, it comes during a reversal of Moscow’s fortunes with Washington. 

Trump just notched a deal with Putin to get Russian diesel in a bid to lower fuel prices that have slowed the American economy and hurt Republican prospects ahead of the midterm elections. On Friday, Trump halted implementation of sanctions that were to be imposed on Russia under a bipartisan bill he signed last month, drawing criticism from lawmakers, including some of his allies.

The senior White House official said Trump made the decisions after seeing few other good options to lower prices.

At a time when Diesel prices are soaring, in part due to limited Russian exports amid a constant drone campaign waged by Ukraine against its refineries, Trump has shown renewed frustration with Zelensky, saying the Ukrainian leader must stop strikes on Russian refineries and suggesting that the country needs a new president. U.S.-led efforts to broker an end to the war, meanwhile, have been largely stalled.

In a post on Truth Social on Sunday, Trump took aim at Zelensky, following Ukraine’s strike on an oil terminal in Putin’s hometown of St. Petersburg earlier in the day. He accused the Ukrainian leader of targeting Russian diesel refineries and said he “doesn’t want to end this war, and probably never did.” The president said he was holding off on imposing sanctions because he didn’t want to drive Russia away from the bargaining table. “I WANT THIS WAR END!” he wrote. 

According to the WSJ, Moscow sees a potential trilateral dialogue as a way of cementing Russia’s membership in a club of great global powers, a status Putin has sought since he entered the Kremlin in 2000. The format also excludes from the picture Europe, which the Kremlin sees as its main obstacle to clinching victory in Ukraine. 

The former Russian intelligence officer who was the WSJ source, said Putin has broad, if unrealistic, ambitions for the trilateral format as a second Yalta summit, which would divide up the globe into spheres of influence. 

Even if Xi and Trump are unlikely to agree to that, the image of the American, Russian and Chinese leaders negotiating the fate of one nation would be a powerful signal. In Taipei, it could reinforce fears that Taiwan’s own future might be one day bargained over in a similar forum, particularly as Beijing has never renounced the use of force to bring the self-governing democratic island under its control.

That said, a summit isn’t without risk for Xi. Chinese officials have concerns about allowing a geopolitical side show to overshadow their designs to use APEC as a showcase of China’s role in the region, said some of the people close to the discussions.

Xi is attempting to walk a fine line between continuing his support for Putin and maintaining China’s economic ties with Europe, the people said. A trilateral meeting like this could risk drawing China more directly into the Ukraine conflict and provoke a backlash from European capitals already wary of Beijing’s tilt toward Moscow. Although, with most European capitals desperate to either export or import from China, it isn't clear what if anything that can do to express their "outrage."

***

In what should come as no big surprise at all, President Trump has issued a whole-hearted endorsement for Benjamin Netanyahu on Sunday as next Israeli prime minister.

Axios points out, "This is the first time in the history of the U.S.–Israel relations that a U.S. president explicitly and publicly endorsed a candidate in the Israeli elections."

There's a mere nine days to go before the country's Oct.27 elections, and domestically Netanyahu has long been accused of prolonging and escalating conflicts in order to sell himself as the necessary 'wartime president'.

Axios further observes that Trump's endorsement was 'needed' as most polls show Netanyahu's coalition "falling short of the 61 seats needed to form a government."

Trump himself on Truth Social touted Bibi as "a Great Warrior Prime Minister" and a "great partner" in the war against Iran.

"If Israel has the wrong Leader, which would be anyone other than Bibi, America will have to do this work [in Iran] ourselves, and I am not inclined to do so," Trump wrote.

The post is full of lavish praise about how Netanyahu 'thrives' under pressure and that most "normal men and women" would in the same situations "would have wilted under pressure."

Political opponents are lambasting inappropriate 'foreign intervention' while Netanyahu is really soaking in and making the most of Trump's full explicit backing:

Prime Minister Benjamin Netanyahu warned on Sunday that Israel could face a “hostile” US president in two years, emphasizing the need to capitalize on the time remaining in US President Donald Trump’s term.

“There is a window of another two years with President Trump, and one of the questions in these elections is who will work with Trump? Who will complete the remaining work?” Netanyahu said.

The full post:

Early on, after the US launched Operation Epic Fury, a slew of top admin officials including Marco Rubio admitted that the war is happening to defend Israel from the Iranian threat, and focused on preventing Tehran from getting nuclear weapons.

The White House has since tried to downplay it, but this remains the publicly articulated rationale among admin legal and official memos defending the 'legal justification' of the war. A State Department publication issued on April 21 of this year stated firmly: "As the United States has explained in multiple letters to the U.N. Security Council, including most recently on March 10, the United States is engaged in this conflict at the request of and in the collective self-defense of its Israeli ally, as well as in the exercise of the United States’ own inherent right of self-defense."

At this point Trump might need Netanyahu for whatever next rounds of bombing break out, but more importantly Bibi needs Trump. Iranian leaders have warned that if the Islamic Republic comes under direct bombing raids again, Israel would in turn likely face Iran's ballistic missiles once again.

Via The Cradle

Egypt announced on Sunday that it has approved the deployment of troops to Saudi Arabia on a "defensive mission" to help the kingdom protect itself from the retaliatory military operations carried out by the Yemeni Armed Forces (YAF).

The Egyptian House of Representatives held "an emergency session to discuss the President of the Republic and Supreme Commander of the Armed Forces’ decision to send military forces to the Kingdom of Saudi Arabia on a defensive mission," said MP Mostafa Bakry.

"The National Defense Council, chaired by the president, concluded its meeting and approved the deployment of the forces and the mission assigned to them," he added. 

He said that "Egypt has never abandoned its pan-Arab role in protecting Arab national security. For us, Saudi Arabia is part of Egypt’s own national security, and any threat to its security and stability is a threat to us."

On Saturday, Egypt’s President Abdel Fattah El-Sisi called for the authorization of defensive measures in support of Saudi Arabia, which has been waging a brutal war and blockade against Yemen for over a decade.

"Egypt is ready to take any measure Saudi Arabia requests to defend its security and sovereignty," the Egyptian president said. 

The news follows the reported activation of the Mecca Defense Pact between Saudi Arabia, Pakistan, and Turkiye.

Pakistani jets have reportedly been striking Yemen, yet Islamabad denied this. Thousands of Pakistani troops are in the kingdom, and Turkiye is also said to be making significant equipment and personnel deployments that are being used against Yemen.

The Ansarallah-led YAF announced it shot down a Saudi attack helicopter in a statement on Sunday, releasing footage of the operation.

The footage shows “the targeting and downing of a Saudi AH-6i attack helicopter with an indigenously manufactured surface-to-air missile while it was carrying out hostile activities off the coast of Najran.” The Saudi-led coalition confirmed that the whole crew was killed.

BREAKING: Egypt is now officially entering the Saudi-Houthi war, with at least two Egyptian Air Force C-130H transport aircraft reportedly landing at King Fahd Air Base in Taif this morning, after Egypt’s National Defence Council, chaired by President Abdel Fattah el-Sisi, pledged “all necessary and possible forms of support” to Saudi Arabia, per Reuters. One of the C-130Hs reportedly left Egypt with its transponder switched off. Taif sits in western Saudi Arabia, within reach of the Red Sea coast and the Yemeni border zone, where Houthi activity has been concentrated. This is now escalating into a full-blown regional war.

— The Hormuz Report (@HormuzReport) October 18, 2026

Earlier, Saudi airstrikes hit Hodeidah in western Yemen. According to the YAF, over 2,500 Saudi attacks have been launched against Yemen since the kingdom’s escalation against the country in July.

The Saudi escalation has killed dozens of civilians. In response, Saudi Arabia’s airports, military bases, and energy sites have been under heavy missile and drone fire from the YAF.

Submitted by Peter Tchir of Academy Securities

Maybe it was because I was in Europe that last week didn’t seem “normal.” Maybe that is why some of the things that I would think are most topical don’t seem topical (or at least weren’t what markets were responding to?). Or maybe it was just a weird week, where the underlying narrative wasn’t as much about the usual suspects, and was much more about supply (of bonds, energy, chips), stop losses (in every market everywhere), and dismal depth of true liquidity (or what we refer to as faux liquidity?).

In any case, much of the price action fits well into our recent narratives, and we were lucky enough to get to focus on yields not being driven by traditional data, and the warning signs coming from credit markets bright and early on Friday morning to kick off Morning Call on CNBC (which timewise wasn’t so bad from a hotel room in Paris).

Did Politics Even Matter?

There seemed to be no shortage of news on the domestic political front that individually might have moved markets, and collectively should have (and maybe it did play a role, but it certainly wasn’t the driving issue, which likely means it is lurking, making any recovery for risk takers more difficult):

• Russian diesel. On September 18^th the President signed the “bipartisan” Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 into law. On October 17^th (less than one month after signing the law and two days before the implementation deadline), the President waived part of the bill. Clearly a lot going on with the ongoing fighting with Iran, with the Houthis and Saudis fighting, and Russia and Ukraine continuing to attack each other, but again, a rather quick change to something that was actually passed through Congress.
  • Starlink managed to get itself dragged into Russia and Ukraine in a different way. Not only has Musk joined the President’s social media campaign that Zelensky must go (could just be a negotiating ploy, but it is out there), but there are also numerous reports that Starlink wasn’t working properly for the Ukrainian military. The reporting could be incorrect, and it may not have hit the valuations of any of Musk’s companies. Having said that, this, along with threats on restricting diesel exports, seemed to convince Europe that their dependence on the U.S. is quite fragile – which, for better or worse, is very good for ProSec™ going global.
• The President put out a Truth Social post on October 14^th on oil and Greenland. “Massive Oil, Gas, and Mineral Exploration is getting ready to begin in our new and beautiful Greenland! There are Experts that are saying that the amount of easily available Oil is far greater than that of almost any land, anywhere in the World…” The oil complex barely moved on this post. The market seemed to instantly “fact check” the word “our” as well as “easily available.” It seems like only a few weeks ago an announcement as bold as this would have moved markets, at least for a little while? Maybe all of the algos, especially any that paid for early access (according to Grok the program was implemented though it is unclear how many, if any, signed up), have lost so much money trading on Truth Social posts that they’ve been given time-outs by their controllers? News agencies are still reporting things like this as “Breaking News,” but markets have become far more discerning, which is an interesting development as volatility has increased of late.

While none of these themes seem to have directly induced any of this week’s market moves, I find it difficult to believe they aren’t playing any role.

We are in the midst of a changing world order, with multiple hot wars in progress, so it seems extremely difficult to believe that things impacting the policy and credibility of the U.S. aren’t contributing to market moves.

Diesel

Last week we went into some detail on Diesel and Yields. We argued that:

The Russian Diesel Deal was too small to matter:

• Markets seem to have agreed that the amount was small and whatever they could export they were going to export anyway. Also, the President “seemed” to back off the concept that the exports were coming to the U.S., expressing it more as a gift to the world.

The EU release of diesel was bigger and more important, and could disappoint:

• The IEA and the EU seemed to have come in around the “middle of the road” in terms of their decision. From all accounts, the IEA and Europe have largely agreed to accelerate the remaining reserves that were agreed to be released back in March of this year. So, it isn’t 50 million new barrels. It is around 20 million barrels that will be released sooner than previously scheduled, assuming each government that has unfulfilled release “quotas” fulfills their part. That seemed far from certain last week because the calculus around the war between Russia and Ukraine has changed (at least for many Europeans).

Diesel Export Ban

• I think that would be a mistake (more on what it does for future trade (not good) than for how it helps in the near term (marginal at best)). The admin backed off of that concept, but who knows in this “rapidly evolving” policy-making atmosphere.

Need Agreements in the Conflict Zones

• Despite the shift in focus to Russia and Ukraine, the most immediate boost would come from a resolution in the Middle East. While oil is making it out of the region with some regularity, there is no evidence that there is as much success with distillates. After months of conflict, the region seems to be getting trickier, rather than easier to assess from a military or diplomatic standpoint, but it is the key to getting all fuel prices significantly lower.
  • The U.S. blockade on Iranian shipping is clearly working. Presumably, greater enforcement of sanctions is also working, but that is more difficult to ascertain. This is good for putting pressure on Iran, but not great for energy prices. I’m in agreement that it is probably a small price to pay to try to change the policies of Iran. It will turn out to be an incredibly cheap price to pay if it succeeds in doing that.
  • Both the Houthis and Iran seem to be willing and able to hit targets, causing the entire region to remain on precarious footing. To the extent they are curtailing supplies it is bad for prices with no benefits accruing to the U.S. (unlike the U.S. blockade).
  • The countries within the region seem to be rapidly reassessing what stance they want to take with the U.S. (evidence of distancing), with Israel (mixed, but in some cases more cooperation), and with Iran and the Houthis/Saudi Arabia (so far seems to be leaning towards some expedient way to “get back to normal” rather than broadening the conflict, with the exception of the Houthis/Saudi Arabia conflict).
• Back to Russia and Ukraine.
  • As of now it seems like it is up to Europe and Ukraine itself to figure out how to continue to prosecute the defense. Presumably there remains significant support behind the scenes from the U.S. (though difficult to tell at the moment), but going forward it seems clear that Europe and Ukraine had better figure out if they can do this alone (it seems like they are getting comfortable that they can).
  • Ukraine agreed to hold off on attacking Russian refineries and did so for a couple of days, but resumed when Russia did not reciprocate. Do we get another attempt at such a ceasefire where this time Russia obliges? It is quite possible, but it is only going to have a second-order effect on energy prices globally (not bad, but only okay, not game-changing).
  • Putin can do what he wants. Zelensky is restricted by a constitution. Iran may have no viable leadership with which to negotiate. Maybe that is why it appears that the President has gravitated to working more closely with Russia as they are the only ones in position to do something decisively (and in a way that might maximize the benefit to America)?

Not optimistic on a big decline in energy prices anytime soon, but it cannot be ruled out, so be careful being too bullish on the commodities themselves. Owning energy producers, globally, is still my main focus, knowing that there will be a sell-off (hopefully small and brief) after any resolution, because longer-term energy independence is the order of the decade.

Apologizing For A Record Number of “Seems”

Using the word “seems” is weak. Period. End of story. It is a cop-out. And yet, try as I might, I cannot gather the courage to eliminate “seems” and be more assertive in this report. There are two main reasons:

1. I am reasonably certain that whoever speaks to the President last has the best possible available information at the time. The recency effect is in full swing. If you talk to the President at 8:30 am you have the best information available to anyone. But, by 3:30 pm, whoever speaks to him then has the best information, which may or may not have changed, with or without a catalyst to change it. This ties directly to some points I was trying to make in the first section.
2. It is incredibly unclear what is a change in policy or what is just a negotiating point that was never meant to be policy. It is perfectly rational with so many things going on that the admin has to keep its real agenda very secret. Telling everyone exactly what we are planning is unlikely to help our position. Yet, it is difficult to ascertain what is noise and what is signal when we are bombarded (figuratively, not literally) with information every single day.

So, while it is a cop-out to use “seems” so frequently, I cannot get comfortable being more assertive, when in the back of my mind, I know we could get messaging from the admin that completely contradicts one of the views I espouse.

Two things I can say with complete conviction:

1. The world is moving to ProSec as we’ve passed the tipping point in the ability to bring global trust back to where it was.
2. After the midterms, no matter what, we will be discussing the U.S. steps on ProSec™, though what is prioritized and how it is implemented may start to change.

For those not familiar with what started as National Production For National Security (and resilience), which we now refer to as ProSec (Production for Security), here are two of our longer reports on the subject:

• ProSec 2026 and Vertically Integrated Nations from July 2026.
• ProSec 2026 from January 2026.

Now that we are moving on to markets, where I feel on more solid ground (despite the volatility), we can try to reduce the use of “seems.” 

Yields, Spreads, Signals, and Liquidity

Two weeks ago, for the first time in a long time, we focused on not just Treasury Yields, but also Credit Risk in Something is Rotten in the State of Yields. Last weekend we argued that enough had occurred that both the bulls and bears could take some heart from the price action. This week, definitively on credit, we moved from a yellow alert to an orange alert.

We will not rehash the work from two weeks ago (this report is already getting long, and much of what we argued then, remains the case today).

We will highlight a few things and emphasize a couple of others that really bear more attention:

• The size and speed of moves.
  • The move from 4.4% to 5.35% in three months in the 10-year Treasury was noticeable. It was a bit more of a steady grind, but during that entire move, there were barely any pullbacks. This week’s move of 17 bps was quite sizeable and rapid. The size and speed work in both directions. I believe the biggest driver of lower 10-year yields this week was the anticipation/hope/maybe even fear that the “compute”-related debt issuance might be set to be slower than anticipated. Economic data? Nah. The Fed? Nah. The deficit? Nah. Positioning and some respite from corporate issuance? Heck yeah.
  • European Sovereign Credit Risk. German vs French (and Italian) 2-year bonds blew out 50 bps in 2 days. That fits our definition of size and speed. Was there some news that drove that move? “Drove” is too strong of a word. Catalyzed a view around issues that had been hanging out near the hoop, but hadn’t yet caused a reaction? It is more plausible that the narrative, once expressed, tested liquidity (too little) and positioning (too complacent).
  • You can now add at least some of the “compute” issuers to that size and speed risk. We will come back to credit in a moment, because my biggest fear has little to do with actual credit risk and everything to do with size, positioning, and a false risk management comfort in liquidity.
• Volatility – MOVE vs the VIX
  • In “Something Rotten” we highlighted that the VIX was well below its average for the year while the MOVE index was almost at the peak it hit in March. VIX finally moved on Thursday and especially on Friday, but still closed well below levels it hit as recently as in June and July and well below 30, which it breached during the early days of the Iran conflict. VIX is relatively useless as a predictor since so many “income alternatives” serve to suppress vol.
    • Selling volatility, in many shapes and forms, has become an “income alternative” for many individuals, wealth managers, and institutions. (I think we can safely say that vol selling strategies are one reason the “traditional” 60/40 strategies are not investing anywhere close to 40% in bonds for their income). As an overall theme, just as we are getting more bond supply from governments and corporations, asset managers are reducing their allocation on a percentage basis. There is an almost cult following (a very smart cult to be sure) of the JEPQ and JEPI roll dates ($90 billion of combined ETF AUM). Grok provided a quick list of other “vol-selling” equity ETFs, including QQQI, SPYI, QYLD, DIVO, GPIQ, and GPIX, that approach another $100 billion of combined AUM.
    • Will these vol suppression strategies continue to be able to suppress vol, or will they be forced to cover via outflows? Or for risk management? For now, I view these types of strategies as having suppressed equity vol, making things like VIX useless as a predictive measure, but they may also be the seeds of a much bigger move higher.
• Credit Beta vs Fair Value. That is probably an overly complex way of saying that I think the basis between where credit beta products are trading (CDX indices and Credit ETFs) and where their fair value plays a major role in whether moves will be contained or they risk accelerations.
  • The good news is that HYG, JNK, LQD, VCSH, and JAAA as a sample of the high yield, long-dated IG, short-dated IG, and AAA CLO sectors are all trading right around their NAV. JBBB (BBB CLO) and ANGL (fallen angel) are trading at a slight discount, but nothing to get too worried about as signals from these aren’t as reliable as those from some of the other ETFs listed.
  • The CDX index is trading slightly tighter than its intrinsic value (according to Bloomberg), which is actually positive for my theory as the “arbs” would be selling protection on single names and buying protection on the index, which tends not to reinforce moves to wider and wider spreads. That being said, I’m not sure how accurate the “intrinsic” value calculation I’m seeing on Bloomberg is. Let’s call this “jury is still out.”
  • So far, even with the spread widening we have seen, it has been orderly, in terms of the underlying bonds and the beta products. I would fade that “orderly,” as I suspect we are moving into the fast and furious stage.
• Two-week-old new issues. I think the liquidity in new issues that are a week or two old is very important to observe. I’m not arguing that they have to be trading better than their new-issue spread. Markets move. What I’m looking for is if you can pick up the phone and sell a block of $25 million on the wire. In “good” times, those bonds that are 1 to 2 weeks old are still fresh enough for dealers to support. Still new enough that the index crowd should be buying them or looking to buy them into month-end. They also tend to be the bonds that people use to manage risk in the early stages of de-risking (you don’t want to be seen as flipping new issues necessarily, but you can justify “lightening” up on some of those types of bonds). Probably the biggest thing I missed this week from being on the road is a good sense of where the “day-old bread” equivalents of new issues are trading. Lots of dealers making live 2-way prices, or having to pick and choose who you engage with as a seller to get the best execution? From our trading desk, which has been growing in volume, where Paul Giroux continues to expand Academy’s presence in secondary trading, the sense is that dealers are pulling back with liquidity and being cautious. Another reason to fade the idea that “orderly” will continue.

I’m as nervous and cautious on corporate credit risk as I’ve been in a long time. It has little to do with credit quality and everything to do with positioning and a false sense of liquidity that has not yet been tested. But, judging by what we’ve seen in credit-adjacent markets (fancy way of saying France, Spain, and Italy), any test could get ugly quickly (yes, I will use “ugly” as a legitimate term). But let’s call that 10 to 20 bps on IG and 3 to 5 points on HY.

I believe that the risk to a large fast move to the downside is much greater than the chance that we see a big move tighter.

Equities

Virtually everything written about credit and rates applies to equities. The positioning, vol suppression, and faux liquidity apply as much to equities as to credit.

Furthermore, it doesn’t surprise me that equities held up to rising Treasury yields quite well. It would surprise me if equities stand up to rising credit spreads as well, especially when the spreads are hitting the sectors that are driving equity returns and the economy – compute spend/build!

Given my view on the risk/reward on credit, I have to be very cautious on the equity side of things.

I will add one issue that I think is not only “unique” to equities, but is also a driver of equity returns that doesn’t get enough attention (though the T-Report does mention it frequently) and that is the “mechanical” buying and selling, not just of top-heavy indices (indices where a handful of names dominates the index on a percentage basis) but also the leveraged ETFs. Of particular concern is that the Nasdaq 100 and the SOXX Semiconductor indices have both top-heavy weighting, and a large amount (in number and volume) of leveraged ETFs, including on single names.

• Focusing solely on leveraged ETFs (ignoring the top-heavy nature of the indices themselves), the Nasdaq 100 (according to Grok) has TQQQ, QLD, and SQQQ, adding up to close to $60 billion.
  • From a positioning standpoint TQQQ (3x Nasdaq 100) has a $34 billion market cap versus SQQQ (-3x Nasdaq 100), which has a $2.2 billion market cap. This would indicate positioning is aggressively bullish. SQQQ has had some inflow, but it looked like there was a lot of “profit taking” or more likely “just get me out of this” on Friday. TQQQ had some selling starting in mid-September, but the dip buying began in earnest. Retail dip buying has been smart, but at almost its largest AUM, how much more can go into it?
• For SOXX, SOXL is the juggernaut at $22 billion, with things like SOX and USD adding another $5 billion or so.
• On the single-name side of things, most are small, but with NVDL leading the way, there is probably $4 billion tied up in leveraged ETFs on NVDA. MUU is roughly that size. While others haven’t gained the traction, there is a lot of speculation and potentially “mechanical” buying in this sector.

Finally, there was a lot of speculation around another fund getting into trouble (and I did follow some accounts that claim to follow Leopold’s trading (if you know, you know)), but it would be too simple if this recent high and recent low follow the same pattern as Situational Awareness. It is possible, but I doubt it. Check out August’s piece on Situational Unawareness.

A Strong View That Might Require Too Many Contortions

I have a very strong view on what could play out in the coming days (weeks). I think it is perfectly logical. Yet, it requires a couple of “leaps of faith” outside of the ordinary to work.

• The sell-off in credit and equities starts with the compute space widening.
• The compute equities do poorly because the spending and buildout are a key part of their valuation.
• Other credit spreads start to widen, not because their own credit has changed, but positioning, losses in other names, and relative value demand it.
• This is the tricky part. At some point investors start pricing in a slowdown for compute-related debt issuance.
  • Compute-related spreads tighten. (That isn’t the tricky part).
  • Compute equities, general credit spreads, and general equities all continue to sell off. This is the tricky part.
    • If wider compute spreads started the selling, wouldn’t tighter compute spreads end it or even reverse it?
    • I guess my case rests on the idea that once we’ve started triggering selling, even once compute bond spreads reverse, investors will be very nervous about the state of the overall economy. Compute spend was a big part of the overall spend. Compute valuations may sell off more, as reacting to widening spreads with lower equity is normal, but the real hit would take place if the growth potential for compute-related stocks gets downgraded as investors doubt the access to capital?

I deleted and re-inserted this section 3 times. It seems to be “too clever” and needs to rely on a few things happening that don’t happen that often in markets. Yet, it seems so plausible (yes, I did use that word again, but c’est la vie) to me, that I need to leave it in.

Bottom Line

Enjoy today, and I expect to see a lot of “green” dots on Bloomberg terminals tonight, despite how unreliable Sunday night trading sessions have been! The only thing more unreliable than Sunday night trading (which so often seems to reverse on Monday mornings) is the NFP jobs data, but we go through the motions on that one. At least tonight we can have the NFL on in the background or the MLB (while the Jays couldn’t make it back this year, at least the Dodgers are out), or I guess 60 Minutes if that is more your cup of tea!

A lot to digest and think about. Don’t hesitate to reach out to your Academy rep if you have any questions, thoughts, or just want to point out all the things I got wrong – it is the nature of the beast in these types of confusing and stressful markets! Take care, good luck, and I’m really excited to be on Bloomberg TV at 8 am Monday morning; it seems impossible as I write this that there won’t be a lot to talk about one way or the other at that time.

***

President Trump said, "France is burning!" on Truth Social early this morning, as what appears to be the fall of France quickly unfolds. Consumed by nation-killing Third Worldism through a decade of unfettered mass migration and a cancerous far-left movement, the nation is on a troubling trajectory as its imploding welfare state collides with a fiscal mess.

Riots across France today. Looting, fires, vandalism and attacks against policemen and firefighters reported from cities across the country. https://t.co/ZpVnuXTvC3

— Visegrád 24 (@visegrad24) October 17, 2026

"The immigration of people from an entirely different world, people with hatred in their hearts, has shattered that once great country. Close your Borders and take control, before it is too late!" Trump continued.

Vice President JD Vance responded to the accelerating far-left violence on X, saying, "Western liberals imported the third world into France and other countries in the name of diversity and compassion. They ignored fundamental questions of assimilation and compatibility. They were told it would lead to this and they didn't listen."

Western liberals imported the third world into France and other countries in the name of diversity and compassion. They ignored fundamental questions of assimilation and compatibility. They were told it would lead to this and they didn't listen. I pray that France, a beautiful country of amazing people, will stop this madness before more of its landmarks burn. And I hope Americans are paying attention. This is the future congressional Democrats seek for your country.

— JD Vance (@JDVance) October 18, 2026

Euronews described the aftermath of the overnight riots, reporting that "broken glass and litter filled the streets." Local outlets reported that rioters looted 1,500 retail stores across multiple major cities.

Urban clashes between the Red-Green militants and the French Patriots expands in France. Here in Rouan. Pass the point of no return...

— Dr Walid Phares (@WalidPhares) October 18, 2026

"My thoughts are also with the 1,500 shops belonging to all the other retail chains and with all the shopkeepers who have suffered the same unacceptable violence," Alexandre Bompard, the chairman and CEO of the Carrefour Group, told the outlet.

France has officially become a war zone. Hundreds of thousands of Muslims have taken over and are burning down the entire country. Muslims are 10% of the population, but account for an estimated 40% of newborns. Imagine how things will be in 20 years. https://t.co/gwNVEm8vYO

— Dr. Maalouf ? (@realMaalouf) October 17, 2026

 

He said the social unrest would have "considerable human and economic consequences."

French Interior Minister Laurent Nuñez said earlier today that the weekend riots had injured more than 600 police officers, gendarmes, and firefighters. He said authorities had arrested more than 2,000 rioters.

Young 2nd and 3rd-generation migrant rioters gather for a group photo to celebrate after setting Paris on fire & looting nearly every store near Champs-Élysées They also proudly give the French people the finger in the picture ?? https://t.co/PqQu8QXPIG

— Visegrád 24 (@visegrad24) October 18, 2026

The endgame for France is quickly approaching as its generous welfare state can no longer support the influx of migrants and services deteriorate. 

Watch:

• "Replacing Europe": Undercover Film Follows The Money Behind Europe's Taxpayer-Funded Mass Migration Pipeline

The country has not balanced its budget since the early 1970s, and sovereign credit default swap spreads are widening in a high-rate environment. The current trajectory, as described by right-wing presidential candidate Marine Le Pen, would put the country on a path toward a sovereign debt crisis.

In recent weeks, Le Pen has already offered a glimpse of the shadow budget she would pursue if she wins next year's presidential election. That would include shrinking the deficit to 3.7% of economic output next year, well below the government's 5% target, before bringing it down to 2.2% by 2032.

Le Pen's Polymarket odds of winning the April 18 election stand at nearly 48%, surging in recent weeks as the riots unfolded. 

Left-wing corporate media are still providing cover for the far-left rioters and migrants who are torching parts of the country. CBS embarrassingly had to delete a tweet that called the riots "scuffles."

CBS just deleted this tweet calling rioters burning down Paris “scuffles” after major backlash You don’t hate the media enough https://t.co/SrmDYUBmd5

— Libs of TikTok (@libsoftiktok) October 18, 2026

We have described how a high-rate environment has put socialism's promises of more and more handouts on "borrowed time" because bond markets are refusing to fund massive deficits for unproductive welfare systems that produce more economic malfeasance.

Socialist failures are piling up across the West. South America is shifting rightward, and a Bolsonaro win in Brazil's runoff election later this month would cement that move.

Related:

• "I Come From Your Future": A Frenchman's Warning To All Americans Voting Democrat

This outcome was very predictable... 

As France is burning, I keep thinking of what the UAE Foreign Minister said a few years ago ?? He accurately predicted this. https://t.co/EgQClncb2s

— Dr. Eli David (@DrEliDavid) October 17, 2026

The West is experiencing what should be considered "lived memories" of the progressive experiment unraveling at the seams, whether in South America or now in Europe, giving rise to what Nomura analysts expect will be a right-wing wave over the next 18-month election cycle.

Meta Platforms' Threads and rival Bluesky have devolved into far-left echo chambers that some describe as platforms for the clinically insane, where intelligent conversations are severely lacking and discussions become shouting matches among those suffering from "Trump Derangement Syndrome" and infected by the woke mind virus.

Democrats flee X for Bluesky amid Musk-Trump alliance https://t.co/ZoW1VemR69

— The Hill (@thehill) November 23, 2024

That concentration of left-wing lunatics on Threads and Bluesky may be strengthening X's competitive position, making it more attractive to professional users and youngsters seeking competing viewpoints and substantive conversations across the political spectrum and about current trends in the real world. 

Nikita Bier, who most recently led X's product development, took to X over the weekend to explain that "Threads was an existential risk to X" last year, but that the threat has largely dissipated.

Bier explains: 

Last year I thought Threads was an existential risk to X.

When Meta puts its full weight behind something, by injecting the app into Instagram, it's DEFCON 5:

You have to squeeze out every last drop of growth from all available surfaces to save the app.

However, I started to realize that the opposite was happening:

It was strengthening X.

If you look at any announcement by Zuck, you will see the most rude & toxic comments on the internet.

But when he makes those same announcements on X, people are thrilled about how he's pushing humanity forward. X is a place where people are excited about the future, so it's no surprise he and his top lieutenants are using it more than their own app.

Threads, and Bluesky, have effectively quarantined some of the worst people on the internet.

And so I had an epiphany: those apps are X's anti-abuse systems.

Last year I thought Threads was an existential risk to X. When Meta puts its full weight behind something -- by injecting the app into Instagram, it’s DEFCON 5: You have to squeeze out every last drop of growth from all available surfaces to save the app. However, I started to realize that the opposite was happening: It was strengthening X. If you look at any announcement by Zuck, you will see the most rude & toxic comments on the internet. But when he makes those same announcements on X, people are thrilled about how he’s pushing humanity forward. X is a place where people are excited about the future, so it’s no surprise he and his top lieutenants are using it more than their own app. Threads — and Bluesky — have effectively quarantined some of the worst people on the internet. And so I had an epiphany: those apps are X’s anti-abuse systems.

— Nikita Bier (@nikitabier) October 17, 2026

Bier's revelation comes one week after he cited what appears to be internal X data that shows Bluesky users have been "coming back to X in droves the last few weeks." 

Elon Musk responded to our note on this development, confirming it as "true." 

@zerohedge True

— Elon Musk (@elonmusk) October 11, 2026

Let's take a stroll down memory lane and remind readers that PR firms and corporate media ran an information campaign centered around the key phrase "Twitter Killer" when Bluesky really gained traction in 2023. 

However, that information operation gained limited traction. 

X has challenged globalist corporate media's role as the primary gatekeeper of information, shifting influence toward the accounts and networks users choose to follow. Its appeal extends to discussions, where competing voices across the political spectrum can have civilized conversations and challenge prevailing narratives. Threads and Bluesky have struggled to replicate X's ecosystem, as it has merely become a 'safe space' for left-wing extremism.