“I heard you were missing me” was Melania Trump’s greeting to the media this week after a 32-day absence from the White House. Let’s just say no robot can compete with that level of multi-layered messaging… yet. All very human, but also surreal. Then again, to quote Vince Vaughn in Wedding Crasher, it took the emerging story of “a stage 5 clinger” staff member in the White House, attending to the President’s almost every need, to bring the First Lady back to Washington. If only Valerie Harp could sort Iran out now. But no, we’ve got Jared Kushner to do that. Of course, we can’t be too harsh on Jared given there are so many incompetent characters to choose from in the current series of the GOPranos. More on that reality TV series later, but let’s first check in on the almost real….
The world of robotics is becoming very interesting. As global bond markets spluttered this week, there’s still no stopping a really hot technology story. Take Chinese humanoid robots player, Unitree, which listed as an IPO in Shanghai this week. The share price rocketed 460% on its first day of trading with demand in the retail portion of the offering 8,000 times over-subscribed. Wow. However, not all the wow factor is in China despite its leadership of all things in the robotics supply chain (to follow EVs, batteries and solar).
Interestingly, VC funds have been ploughing money into the European construction technology sector, specifically robotics. Almost €1 billion has been raised across 71 construction technology deals this year (Source: Pitchbook). Note Deloitte believe the global construction market will be worth $16 trillion by 2030 as productivity lags in most sector league tables and faces an increasingly challenging labour/skills shortage. For illustration of the productivity opportunity, check out Swiss startup, Gravis Robotics. It raised a $200 million Series A led by SoftBank at a $1 billion valuation in one of the region’s largest construction technology rounds this year. The company retrofits heavy construction machinery with autonomous technology, claiming productivity gains of up to 30%. Don’t be surprised to see a few opportunities to emerge in Ireland given its global leadership in hi-tech construction. While we reference leadership, here’s an example of how not to lead…..
Readers will recall my earlier reference to Jared-level White House incompetence, but also our article last week highlighting the self-serving actions of US Treasury Secretary, Scott Bessent. As a refresher, the US Treasury (not the Fed) intervened in the foreign exchange markets to bolster the Japanese Yen. Nothing wrong with that action per se, but Bessent also decided to sell euros (not US dollars as expected) without consulting the ECB. Consider that pretty much a nuclear financial first in non-collaborative action among major advanced economic blocs. Anyway, the motive of Bessent and the White House was to take pressure off the Japanese who might have to resort to selling the $1 trillion of US bonds they hold. That selling could push up yields/interest rates for the US government and….. voters. Clearly, this is a sensitive one (bond yields) for the White House ahead of mid-term elections. So, this week’s episode of bond market ‘control’ involved Bessent and the Treasury boosting demand for its bonds by doubling its own purchases of those same bonds. Here are the headlines…
US Treasury doubles debt buyback to steady bond market amid inflation fears - The Guardian
Treasury Secretary doubles US long-bond buybacks in the face of surging yields - Reuters
So how did that go? Not very well. The US bond market briefly strengthened as Bessent intended, but then reversed course in a matter of hours. Despite a promise to buy $4 billion of US Treasuries, 30-year bond yields continued to march upwards to 5.34%, the highest levels seen since 2007. For context, that $4 billion spend-signalling by Bessent is a mere drop in the Strait of Hormuz (!) compared to the $32 trillion US bond market. The worry for GOP election strategists and the GOPranos in the Oval Office is that the bond market starts to really flex its muscles. And believe me, the bond market won’t suffer the gibberish currently being used to describe Strait of Hormuz negotiations. Here’s the latest from the stable genius in the big house without a ballroom….
“Uh, we've, we're controlling, essentially controlling and soon controlling the Straits. We're doing very well with Iran. The press doesn't like to say that, although a lot of the press does say it, you know, because the Navy's gone, the Air Force is gone, the leadership is gone.”
Sure thing, Donald. The oil price currently trading at $87 per barrel is still 30% higher than the cost of oil before hostilities kicked off on February 28th. Yes, 6 months ago. Long enough for even die-hard MAGA voting districts to smell panic. This week the 12th District of Pennsylvania held a Special Election with a military veteran and commercial pilot GOP candidate, Scott Timko, expected to extend a Republican hold on this seat which has lasted since 1994. The district was also an 18 percentage point margin winner for Trump in the Presidential vote of 2024. Until now. Construction loan administrator, Brandon Dukes, flipped the seat to the Democrats by a tiny 88 vote margin but the almost 20 point swing away from the GOP will have sent shock waves all the way to the Lincoln Memorial reflecting pool. Perhaps the world is healing….
On a final positive health and healing note, it is almost 18 years since a stock in the S&P 500 doubled in value in a single day. Step forward Moderna, biotech company and Covid-19 mRNA vaccine innovator, which has announced highly encouraging trial results for treating skin cancer. This seemed to take the market by surprise as the share price of Moderna rocketed by 176%. Apparently, Moderna was one of hedge fund investors’ most hated (‘shorted’) stocks in the market. So, this unexpected rise for Moderna and the Bessent booboo in the bond market proved particularly painful for algorithm-based quant hedge funds. The Financial Times headline gave a sense of the crazy day:
“Quant hedge funds suffer worst day in 2 years as Treasury boosts buyback and Moderna shares leap.”
One suspects these hedge funds and bond traders will act soon if there’s no sign of a cure for Oval Office “crazy”. And to be absolutely clear, the Wall Street bond trading bots/algorithms are far scarier than Chinese humanoid robots…