Minsky New Year!
December 28, 2025
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“We defined [the debt] as a python, wrapped around our necks, we couldn’t breathe properly, around our chest, our ribs, and the legs. That is why we set out to do what we did.” [DOGE?]
As it stands, 94 per cent of that has now been restructured and Fitch predicts government debt will decline from 114 per cent of GDP in 2024 to 93 per cent in 2025 and 85 per cent next year.
“We have got a recovery but it’s uneven at the moment. The parts that are recovering are big and therefore making a significant impact on the overall macros. But the job now is to convert all of that into benefit for the individual right at the bottom.”
“The price of goods is starting to stabilise. Before that, it was going like a rocket. As of now, the president has got long-term policies,” he says.
The above clips sound like they could refer to the US economy. Excessive gov’t debt. A K-shaped economy that’s driven by data center spending/financial assets and not filtering through to the lower masses. Inflation has decelerated but still manifests in widespread unaffordability.
However, this article isn’t about the US, but rather Zambia and its President Hichilema. I would note that the St Louis Fed site pegs US Gov’t Debt to GDP at 118%, so there’s a bit of catching up to do to get to Zambia. Fascinating piece, with Zambia’s prospects driven in parallel to the AI data center boom due to the primary export of copper, with both China and the US angling to secure supplies. According to another article, Zambia supplies around 4% of the world’s copper and sits on huge reserves.
Of course, market focus this past week was dominated by precious metals, especially silver. YTD:
Silver +168% (up 18% last week) 79.27
Gold +70% to 4533.20
Platinum +166% to 2468.60
Palladium +112% to 1941.55
Copper +43% (using rolling first future, 576.65)
Regarding silver, China has announced new export restrictions effective Jan 1, 2026. The CME has jacked up margin requirements, announced late Friday, effective Monday. Silver from $24.2k initial to $27.5k. Gold from $22k to 24.2k. Note that Wednesday to Friday gain in SIH6 was 5.51 or $27550 for one contract. I would guess we’re in for a series of margin increases.
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There’s nothing further here for a warrior. We drive bargains; old men’s work. Young men make wars. And the virtues of war are the virtues of young men: courage and hope for the future. Then old men make the peace. And the vices of peace are the vices of old men: mistrust and caution. It must be so.
–Prince Feisel to TE Lawrence, Lawrence of Arabia
I would frame ‘mistrust and caution’ as counterparty risk. The warriors have torn through markets. Now the question becomes one of forward commitments. Can they be honored? There are obvious signs of stress. In this transition, it’s interesting to highlight Apollo’s pivot to an extremely defensive posture. (Financial Times, Dec 22). CEO Marc Rowan, “We believe that prices are high, that rates – long rates – are not likely to plummet, and that we have enhanced geopolitical risk.”
In a series of private meetings and public appearances this month, Marc Rowan has been candid about his pessimistic outlook on the current investment climate. “As a company, not only are we in risk-reduction mode, but our balance sheet is also in risk-reduction mode,” Rowan told investors, citing a “cash-is-king” philosophy. …his top priority is building “the best possible balance sheet” to ensure the firm is ready to profit when “bad things happen.”
Apollo (APO) has $908 billion in assets. Market cap is $86b. YTD stock down 10%.
Washington Post reports that corporate bankruptcies are accelerating, with 717 filings though November, 14% more than the same time in 2024. “…most apparent among industrials and consumer-oriented businesses with discretionary’ products or services.”
In a sign of term-premium expansion, 10/30 yield spread is near the year’s high at 68.4 bps. The high in August was 69.7. Low in Jan was just 18 bps. So, while the range in the 10y has been between 4.19 and 3.95 since early September (3 eases since then), the long bond yield has pressed higher, ending the week at 4.818% (low of 4.53 since Sept). In the meantime, WTI is closing out the year near the lows, with CLG6 56.74. Low for the year has been 54.98, which is the lowest since 2021, before the hiking cycle ever started. However, the Bloomberg Commodity Index (BCOM) ended Friday at a new HIGH for the year, at 112.47. Gold and silver make up just over 30% of the index, NatGas, WTI and Brent combined account for about 17%. A couple of sidenotes, from Nov 2021 to early March 2022, BCOM surged 39%, a burst of inflationary impulse. The first Fed hike of the cycle was in March 2022. Currently, from a low in mid-August, BCOM is up 13%. A sign of a new general price surge? Ten-yr breakeven is NOT forecasting that, ending the week around 225 bps from a recent high of 244 in late August. But the long-bond is whispering caution.
One other interesting item: this year, especially since mid-August, BCOM and the MOVE index have completely diverged, with MOVE ending at 58.5, the low since late 2021, and BCOM at its highest level since late 2022, early 2023. It seems to me that Apollo is trying to get in front of the Hyman Minsky ‘Financial Instability Hypothesis’ reflected by both MOVE and VIX: stability breeds instability. Chart below.
On the week changes in treasury yields were within a couple of basis points. SPX edged to a new all-time high. Japanese bond yields likewise remain pinned close to the year’s highs. VIX ended at 13.6; there were a couple of lower prints in 2024, but this is easily the low for calendar year 2025.
| 12/19/2025 | 12/26/2025 | chg | ||
| UST 2Y | 347.5 | 348.1 | 0.6 | |
| UST 5Y | 369.8 | 369.6 | -0.2 | |
| UST 10Y | 414.9 | 413.4 | -1.5 | |
| UST 30Y | 482.6 | 481.8 | -0.8 | |
| GERM 2Y | 215.3 | 214.0 | -1.3 | |
| GERM 10Y | 289.4 | 286.1 | -3.3 | |
| JPN 20Y | 296.8 | 295.9 | -0.9 | |
| CHINA 10Y | 182.6 | 183.3 | 0.7 | |
| SOFR H6/H7 | -41.0 | -39.0 | 2.0 | |
| SOFR H7/H8 | 20.0 | 18.0 | -2.0 | |
| SOFR H8/H9 | 21.0 | 19.5 | -1.5 | |
| EUR | 117.10 | 117.72 | 0.62 | |
| CRUDE (CLG6) | 56.52 | 56.74 | 0.22 | |
| SPX | 6834.50 | 6929.94 | 95.44 | 1.4% |
| VIX | 14.91 | 13.60 | -1.31 | |
| MOVE | 59.41 | 58.50 | -0.91 | |
