On Life Support
May 12, 2026
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–There’s a lot of news this morning but I think this BBG article might be the most important: “A top South Korean policymaker said the nation should pay citizens a “dividend” using taxes on AI profits, underscoring growing pressure to redistribute gains from a boom that’s enriched chipmakers…” KOSPI index was 5000 at the end of March, made a new high of 8000 today but has made an outside day with a lower close. Classic reversal….but I know from personal experience the classics haven’t been working in my favor recently…
–The allure for gov’ts to charge taxes on ‘excess AI profits’ to mollify anti-AI populace could catch on globally, like wildfire.
–Yesterday I noted on X that SENSEX was selling off as Modi urged citizens to conserve fuel, avoid foreign travel, etc. In contrast, Trump is likely to suspend the federal gasoline tax. SENSEX is lower this morning, and feels like a near-term test of the April low is in the cards. Trump can’t bear the pain from weaker stocks, Modi can.
–UK rates are making new highs with Starmer floundering. BBG notes the UK 30y yield tops 1988 high. The UK ten year is also making a new high of 5.12 (last seen in 2008). Note that six years ago the yield was almost zero, at 7.5 bps. Japan’s 10y JGB is also at a new high this morning of 2.545% (low was negative 29 bps in 2016). German bund isn’t quite at a new high, but trying. US 10y is currently 4.43%, not a new high but certainly vulnerable as US treasury auctions 10s today and 30s tomorrow. Today’s CPI could have a large impact as well, expected +0.6 vs +0.9 last, with yoy expected 3.7 from 3.3 (Core 2.7 from 2.6). CLM6 higher this morning at 101 with the Hormuz ceasefire on “life support”.
–I noted this weekend that NDX (nasdaq 100) had added over $9 trillion of market cap since the end of March, nearly 1/3 of GDP, and concluded this wealth effect might add to inflationary pressures. Pullback in US stocks this morning…
–This X post is from @Fongern_FX
Oh, oops! Blackstone’s flagship private credit fund is under redemption pressure. Jon Gray (President & COO) responds by asking senior executives to put in their own money. When the largest manager in a $1.8tn market needs its own people to plug the gap, the model is breaking.
That’s Blackstone, below is Ares: PIK is analagous to “add it to my tab” at the tavern.
“In 2025, noncash PIK interest and dividends were nearly $490 million, or 34%, of Ares’ net investment income. A decade ago, PIK was 8% of its net investment income.”
“There won’t be any money, but when you die, on your deathbed, you will receive total consciousness.” -The Lama
[total ‘noncash’ consciousness does NOT equal “investment income”]
–Just as it feels like global markets are entering a maelstrom as Trump and Xi are set to meet, I’ll be out of office the rest of this week. Good luck.
