Deep within the heart of an ancient forest, shrouded in emerald foliage, a banshee unlike any other lay hidden. Her skin, as vibrant as the freshest leaves, seemed to blend seamlessly with the lush surroundings. She was a guardian of the woods, her wailing songs carrying messages of caution to those who dared to enter her territory. She was not, as others of her kind, a harbinger of death, in the first instance. She was a protector of the delicate balance of the forest. Her mournful cries were warnings to the creatures that called the woods home, a reminder of nature's unforgiving ways.
Read MoreAI has taken everyone and everything by storm this year, most successfully embodied by the services created by Open AI, chiefly its digital assistant ChatGPT and image generation service DALL-E. All technology firms, if not companies more generally, are now looking for a way to integrate AI into their core business, less they want to get left at the proverbial station by the departing train. I am moderately curious and open-minded to new technologies so I have dutifully tried to update my knowledge. I have read around, and listened to conversations with Open AI’s main protagonists and proponents of the technology, as well as those who believe that AI could well be the end of humanity. I am still undecided about how important this technology is. After all, a healthy dose of cynicism and scepticism have to be applied to everything that is presented by Silicon Valley as the next big ting. It’s possible that we’ll be praying at the altar of AI, or even AGI, in short order, but it’s equally possible that no one will remember OpenAI in a year’s time.
Read MoreEveryone is talking about the sell-off in bonds these days. Yields on the US 10-year benchmark is up nearly 150bp since April, within touching distance of 5%, and 30-year yields are now just over 5%, up from 3.7% in April. With the two-year yield up just 100bp over the same period, the curve has bear steepened by 50bp, and is now looking to un-invert due principally to a sell-off in long bonds, contrary to widespread expectations of bull-steepening via a rally in the front end. The 2s10s is still inverted by around 17p , but the 2s30s is now—as far as I can see from the close on Friday the 20th of October—just about positive. No wonder that the long bond is on everyone’s mind. Sustained bear-steepening during inversions are rare sights in G7 bond markets, so when they are spotted in the wild, they tend to grab the attention and imagination of investors and analysts. But what does it mean? Put on the spot, I’d say that bond market volatility is underpriced.
Read MoreI have just returned from two weeks of holiday, and I have a lot on my mind. First things first, on the war between Israel and Hamas; emotions are running high and as a result, the quality of initial opinion and analysis is clouded and governed by hard-held priors. That always make for a treacherous information environment, especially in a situation as complex as is the conflict between Israel and its border states, not to mention the political situation in the Middle East as a whole. I am making the following initial assumptions. As long as it is Israel and Hamas pounding each other to a pulp—with devastating consequences mainly in Gaza as the IDF brings the heat—markets will eventually stop caring. The obvious risk is that a bloody conflict between Hamas and Israel spills over into wider military conflict in the Middle East. It is grim irony that Iran recently warned how a heavy-handed response by Israel “could spiral out of control and ricochet into far-reaching consequences”. Teheran is right, and I suspect that it is exactly what it, Hamas, other key actors in the Middle East, not to mention Russia, want.
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