We’re Speaking to Don Wilson at Odd Lots LIVE in Chicago Joe Weisenthal and Tracy Alloway Plus some thoughts on the bond market and statecraft. Hello and welcome to the newsletter, a grab bag of daily content from the Odd Lots universe. Sometimes it’s us, Joe Weisenthal and Tracy Alloway, bringing you our thoughts on the most recent developments in markets, finance and the economy.
And sometimes it’s contributions from our network of expert guests and sources. Whatever it is, we promise it will always be interesting. If you like chatting with us, check out the Odd Lots Discord, where you can hang out and talk with us and with other listeners 24/7.
Later this month, we will be in Chicago, at City Winery, to host another Odd Lots live show, and you won’t want to miss this one. We’ve already announced two of our esteemed guests — Terry Duffy and James Robinson — and today we announce the third: Don Wilson, the founder and CEO of DRW. We spoke to him last year on stage about building a market for GPUs.
Plus we are doing some live trivia (details forthcoming). It’s going to be a great show. Get your tickets now! On Monday, we’ll be releasing an episode with Carolin Pflueger, associate professor at the University of Chicago and a resident scholar at the Chicago Fed.
Carolin’s done a ton of research on the bond market and central bank reaction functions, so she’s really the perfect guest to talk about the recent selloff in US Treasuries and how it fits into broader historic trends. One thing that we briefly touched on is the connection between bond yields and perceptions of state strength and military might. Here’s Carolin: In other words, if investors perceive a state to be ‘safe,’ then that perception can translate into lower borrowing costs that then allow that state to expand military capacity, which then makes investors think they are ‘safer’ still.
It’s something worth thinking about when you look at a chart comparing the US 10-year Treasury yield to that of its equivalent Chinese government bond: Obviously the US and China aren’t at war right now. But you could easily argue that they’re clearly in strategic competition when it comes to AI development, and AI will be an important component of any future war. China, by far, has one of the lowest costs of capital in the world right now (and, arguably, an added advantage when it comes to AI in the form of lower electricity costs).
That doesn’t necessarily translate directly into a military edge — as Adam Tooze very saliently points out in the Financial Times today, the US is financing its AI buildout predominantly through the private sector. But it does highlight Carolin (and Pierre’s) broader point: if military spending, geopolitical risk, and government bond prices are all intertwined, then financial markets can theoretically help make a hegemonic transition possible even without war. We asked Odd Lots regular Nathan Tankus to send us a book that our readers might enjoy.
He told us that Phil Rocco’s Counting Like a State about the 2020 Census “is total catnip for Odd Lots” fans. “Counting Like a State is about nothing less than the entire infrastructure that produces putatively ‘national’ government statistics but are actually a federalist project in the truest sense,” he writes. Rocco’s book is all “about the messy reality that produces these statistics,” which makes the work incredibly “timely.”Airlines have long tried to manage the cost of jet fuel through fuel hedging, using things like swaps and options to hedge against future increases in price. On a good day, jet fuel prices are pretty volatile.
Throw in two major wars, and the difficulty of hedging right now comes into focus. David Kang has firsthand experience hedging for a large carrier — he was a group treasurer at Qatar Airways — and for today’s podcast he tells us how it all works. He also explains why airlines use heating oil as a proxy for jet fuel, how much they can make by raising ticket prices and fuel surcharge...
Source: Bloomberg Markets · Summarized by HeadlinesBriefing