Evening Briefing: Americas

As Wall Street learned Friday evening that Donald Trump is preparing to announce Scott Bessent, who runs macro hedge fund Key Square Group, as his nominee for US Treasury secretary, traders were looking back on a strange week in markets. The buy-everything mania that greeted Trump’s election has been cooling as his finance fanbase begins to consider the consequences of some of his economic plans. Yet on the speculative fringes, the risk-taking extravaganza isn’t just continuing—it’s getting bigger by the day. Heavy trading—and big price moves—in everything from crypto to leveraged exchange-traded funds was the story in a week where swings in the S&P 500 and Nasdaq 100 finally started to abate.

Ground zero for the casino crowd is the $140 billion complex of amped-up exchange-traded funds tracking the likes of Big Tech stocks and Michael Saylor’s Bitcoin proxy MicroStrategy. No corner of the juiced-up ETF world saw more action than funds centered on the software firm Saylor transformed into what amounts to a pure-play bet on Bitcoin (more on that below). Two leveraged funds based on the company saw a combined $420 million inflow amid a 24% surge for the underlying stock this week. The popularity of the two funds has led some market-observers to point to a leveraged-loop buying frenzy. —David E. Rovella

Apollo Global Management and Citadel—giants in the world of active investing—have some negative things to say about passive funds. At Apollo, the view is that the hidden costs of the passive-investing juggernaut include higher volatility and lower liquidity. Ken Griffin’s Citadel meanwhile contends that regulators undervalue active managers’ role and are crimping their growth. US ETFs—a bastion of passive investing—have record net inflows of $913 billion this year, and combined assets exceeding $10 trillion, thanks to the buoyant US stock market.

The US Treasury Department is examining JPMorgan’s relationship with a hedge fund said to be part of a network overseen by Iranian oil kingpin Hossein Shamkhani. The probe is said to scrutinize whether the Wall Street giant complied with all rules and regulations when it took on Ocean Leonid Investments as a client. That entity was recently suspended by Dubai’s financial free zone. Bloomberg reported last month its role as a hedge fund with offices in London, Dubai and Geneva that’s overseen by Shamkhani. JPMorgan, ABN Amro and Marex Group were among the lenders that have offered the firm leverage. Shamkhani’s father Ali, a prominent adviser to Iranian Supreme Leader Ayatollah Ali Khamenei, was sanctioned in 2020 by the US Treasury’s Office of Foreign Assets Control, which cited his “key role” in the Islamic Republic’s defense policies.

“Overheated” is how short-sellers Citron Research described MicroStrategy on Thursday. That somehow understates the hype surrounding company founder Saylor’s bet on Bitcoin using capital-market funding, which has fueled MicroStrategy’s stock-price rise of over 600% this year, Lionel Laurent writes in Bloomberg Opinion. It looks more like a corporate-finance version of an infinite money glitch in video-games—lucrative, addictive—and likely unsustainable.

Michael Saylor Photographer: Liam Kennedy/Bloomberg

A Federal Reserve pandemic program aimed at supporting mid-size businesses is having the opposite effect on some of them these days, burying some borrowers in high interest rates and balloon payments and leading to firings at companies struggling to stay afloat. The central bank designed the Main Street Lending Program to help businesses that were generally too big to apply for forgivable loans through the Paycheck Protection Program and too small to tap US capital markets. The program, which marked the Fed’s first effort to systematically support American businesses in such a way since the Great Depression, ultimately made 1,830 adjustable-rate loans ranging in size from $100,000 to $300 million. The large majority of the program was a success, with much of the $17.5 billion in loans having been repaid. But $1.23 billion in interest and principal payments was in default as of Oct. 31, a figure which may rise.

The US government’s debt load is now seen as the biggest risk to financial stability, outweighing persistent inflation in a Fed survey. “Concerns surrounding US fiscal debt sustainability were atop the list in this survey, followed by escalating tensions in the Middle East and policy uncertainty,” the Fed said in its semi-annual financial stability report. Taking a look at households, the central bank said credit card and auto loan delinquencies were above average, especially among those with lower credit scores. Overall, they judged vulnerabilities related to household and business debt as “moderate.”

Prominent critics of the Kremlin, and Vladimir Putin in particular, seem to have a terrible habit of dropping dead under very suspicious circumstances. Some fall out of windows, bludgeon themselves to death, are poisoned or are said to have committed suicide in ways that defy logic. Anonymous US intelligence officials have long said they suspected that some of the mysterious deaths over the years were part of a campaign by Putin to assassinate his enemies. But internal US government documents that contained such explicit assertions have never really surfaced. Until now.

In 2000, Ridley Scott’s Gladiator shook Hollywood out of its boots, instantly reanimating the genre of ancient historical epic (“sword-and-sandal” if you prefer the cringey movie reviewer go-to). The story of the Roman general-turned-slave played by Russell Crowe was a monster crowd pleaser that went on to win best picture. Crowe also got best actor for his rumbling take on a man seeking vengeance for his murdered family (and ultimately dying for his trouble). Now, 24 years later, Scott returns with Gladiator II. These days, everyone is feeling a lot less agreeable than at the turn of the century, but the Roman Empire as imagined by Scott may offer a welcome respite—and a lot of fun for the whole bloodthirsty family.