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Billionaire hedge fund manager Bill Ackman believes long-term Treasury yields can shoot even higher in the short run on the back of stubborn inflation.
“I would not be shocked to see 30-year rates through the 5% barrier, and you could see the 10-year approach 5%,” he told CNBC’s Scott Wapner at the CNBC Delivering Alpha Investor Summit on Thursday in New York City.

The Pershing Square Capital Management CEO said he did not believe the Federal Reserve could get inflation back down to its 2% target partly due to a resurgent labor movement and high energy prices.
“Our view is that we’re in a different world,” the investor said. “You have a generation of people that are used to rates, you know, four sounding like a high interest rate. On a historical basis, it’s an extremely low rate of interest.”
The benchmark 10-year Treasury yield hit a 15-year high this week, topping 4.65%, as the Federal Reserve signaled higher interest rates for longer this month. The 30-year rate last traded around 4.71%.

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10-year Treasury yield this year

Still, Ackman said buying the 30-year Treasury bond isn’t worth locking up your money for that long with inflation eating into its return.
“We have an economy that is still strong and inflation at 3.5%, 4%, persistent,” Ackman said. “Our view is basically you’re not being paid enough to enter into a 30-year contract with this government.” More

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Brad Gerstner, Altimeter Founder and CEO, speaks at the Delivering Alpha conference in NYC, Sept. 28, 2023.
Adam Jeffery | CNBC

Altimeter Capital Chair and CEO Brad Gerstner is massively bullish on artificial intelligence, saying the power of the advanced technology could even trump the internet.
“AI is going to be bigger than the internet, bigger than mobile and bigger than cloud software,” Gerstner said at CNBC Delivering Alpha Investor Summit on Thursday in New York.

AI has been dominating headlines this year, creating a buying frenzy on Wall Street that pushed major enabler Nvidia over a $1 trillion market cap. Buzzy chatbot ChatGPT, capable of taking written inputs from users and producing a human-like response, was an instant phenomenon globally, becoming the fastest-growing software in history.
The widely followed tech investor called the rise of AI a “super-cycle” just like the dotcom boom in the late 1990s. But he cautioned that a typical characteristic of a super-cycle is conflicting sentiments and uncertainties, at least in the beginning.
“You have to get comfortable with two simultaneous but competing truths. On the one hand, we probably overestimate in the very short term, which leads to price inflation,” Gerstner said. “But much like the internet in ’98 and ’99, where there was overpricing in the short run, we dramatically underestimated the impact it was going to have over the … decade.”
Gerstner said he’s grown hopeful about the coming years as the Federal Reserve nears the end of its tightening cycle. He added that the IPO pipeline looks “chock full” for the three quarters ahead.
“I’m very optimistic over the course of the next two or three years. Why? Because we’re not going to continue to hike rates, and we’re at the beginning of one of the biggest tech booms in the history of technology,” he said.

Altimeter held Meta, Microsoft and Nvidia as some of its biggest bets at the end of the second quarter.
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Roy Rochlin | Getty Images Entertainment | Getty Images

Billionaire investor Ray Dalio is watching closely the “risky” U.S. fiscal situation.
“We’re going to have a debt crisis in this country,” the founder of hedge fund Bridgewater Associates said in an interview with CNBC’s Sara Eisen that aired Thursday. The two were speaking at a fireside chat at the Managed Funds Association. “How fast it transpires, I think, is going to be a function of that supply-demand issue, so I’m watching that very closely.”

U.S. debt levels surpassed $33 trillion for the first time this month as lawmakers negotiate a U.S. spending bill before the Oct. 1 deadline. A failure to reach an agreement could mean a government shutdown and raise the perceived risk of the country’s debt.
U.S. debt levels have ballooned in recent years, especially after a roughly 50% increase in federal spending between fiscal 2019 and fiscal 2021, according to the U.S. Department of the Treasury. Investors fear interest rates may keep rising as the U.S. fiscal situation worsens, hurting the demand for Treasurys.
Dalio is concerned there are more headwinds for the economy than just high debt levels, saying growth could fall to zero, give or take 1% or 2%.
“I think you’re going to get a meaningful slowing of the economy,” Dalio said. More

A CarMax dealership on April 11, 2023 in Santa Rosa, California.
Justin Sullivan | Getty Images

Check out the companies making headlines before the bell.
Micron — The chipmaker’s shares fell 3.4% Thursday before the bell on the back of a weaker-than-expected earnings forecast. Micron estimates a fiscal first-quarter loss of $1.07 per share, on a non-GAAP basis, while analysts polled by LSEG expected a loss of 95 cents. For the fiscal fourth quarter, the company posted a narrower-than-expected loss as well as revenue that topped expectations. 

GameStop — The meme stock rallied nearly 8% after the company named billionaire activist investor Ryan Cohen as the company’s CEO effective immediately. The move comes three months after prior CEO Matthew Furlong was fired.
Duolingo — Shares gained more than 2% in the premarket. UBS initiated coverage of Duolingo on Wednesday with a buy rating, saying it’s a “best-in-class brand.”
CarMax — Shares fell nearly 12% as fiscal second-quarter earnings fell from a year-ago on weakening demand for used cars. The company said it earned 75 cents per share on revenue of $7.07 billion. CarMax said it bought 14.9% fewer vehicles from consumers and dealers from the previous year as steep market depreciation hurt volume. 
Workday — The cloud services company tumbled more than 11% after it lowered its long-term subscription growth target to a range of 17% to 19%, compared with its previous target of 20%.
Peloton — Shares popped nearly 14% in premarket trading Thursday after Peloton and Lululemon announced a five-year strategic partnership on Wednesday. According to the deal, Peloton’s content will be available on Lululemon’s exercise app and Lululemon, in turn, will become Peloton’s primary athletic apparel partner.

DigitalBridge — Shares of the digital infrastructure company jumped 7.7% after JPMorgan upgraded the company to overweight from neutral. The firm said DigitalBridge is largely finished with the transformation of its business.
Concentrix — Shares declined 5.1% after the company’s third-quarter earnings report missed on both the top and bottom lines. Concentrix posted adjusted earnings of $2.71 per share on revenue of $1.63 billion. Analysts polled by FactSet had estimated Concentrix would earn $2.85 per share and revenue of $1.64 billion. The company’s fourth-quarter earnings forecast of $3.03 to $3.15 per share also fell below analyst forecasts of $3.33 per share, according to FactSet.
— CNBC’s Sarah Min and Pia Singth contributed reporting. More

Foreign visitors have come flooding back to Japan since it reopened to travel in late 2022, making up for three years’ absence during the covid-19 pandemic. The weakness of the yen has produced some bargains for these recent arrivals. For the first time in a much longer period, investors are similarly excited about the bargains to be found in Japanese stockmarkets. Unfortunately, much like the travellers who zip through Tokyo in go-karts dressed as Mario and Luigi, many now risk going overboard in their newfound enthusiasm.From January to August foreigners bought ¥6.1trn-worth ($40bn-worth) of Japanese stocks, which represents the largest nominal inflow during the same timeframe since 2013. According to a survey by Bank of America, more fund managers are now overweight the country’s shares (ie, investing more than they usually would) than at any time in almost five years. The return of investors to Japan’s markets has been driven by optimism about reforms to corporate governance, with companies increasingly subject to investor activism and therefore returning cash. High-profile winning bets on Japan’s trading companies by Warren Buffett, a famous investor, have provided a boost. So has the fact that Japanese stocks have returned 13% this year, in dollar terms, compared with a 10% rise globally.All this optimism will soon be put to the test. After all, it is not just prospects for corporate-governance reform that have fuelled the rise in Japanese stocks; it is also the astoundingly cheap yen, and that may not last. The currency trades at ¥149 to the dollar, its weakest in three decades—down by 23% since the end of 2021. Japanese exporters, which face domestic costs but make much of their revenue overseas, have benefited enormously from this state of affairs.The yen’s weakness has been caused by huge differences in interest rates, with capital flows moving to higher-yielding assets. Unlike almost every other central bank, the Bank of Japan (boj) has refused to raise rates: its short-term interest rate remains at -0.1%. Yet observers increasingly expect the boj to shift, abandoning its cap on ten-year government-bond yields and raising rates for the first time since 2007. Japan’s “core core” inflation, which strips out fresh food and energy prices, sits at 4.3%, far above the central bank’s target. Even a small rate rise would squeeze the government, which last year had net debts equivalent to 163% of Japan’s gdp, twice the rich-world average.Some had thought that a virtuous cycle of mild inflation and stronger wage growth might finally be returning to Japan after decades of torpor, which would have made higher rates and a stronger yen less bothersome. But after months of waiting there is little evidence that pay really is rising. Employee earnings have dropped 2% in real terms in the past year and by 8% in the past decade. The ratio of job vacancies to applicants, which reached around 1.6 in 2018 and 2019, is now at 1.3, and falling rather than rising. Thus if the boj is dragged into tighter policy, it will not be by a budding recovery. Rather, it will be because of external pressure. With oil prices hovering above $90 per barrel, inflation in energy imports will filter through to other prices over time.Even if the boj does manage to stick to its guns, the gulf between American and Japanese interest rates looks unlikely to widen much, since the Federal Reserve has paused its rate rises. The transitory effects of the weaker yen will therefore begin to ebb for Japanese companies. A fall in the yen will boost earnings once, as foreign revenues are magnified in yen terms relative to the previous year. However, unless the yen continues falling, the support is a one-off. If the American economy weakens and investors come to expect interest-rate cuts, the yen will almost certainly surge against the dollar, weakening overseas earnings in the opposite way.Reforms to Japanese corporate governance are not to be sniffed at, and some beaten-down companies still present opportunities. Yet these bright spots will not be enough to overwhelm the macroeconomic gloom that is now enveloping Japan. Global investors sometimes seem capable of holding only one narrative in mind when it comes to the country: Japan is either a stagnant mess, with little hope of rescue, or is on the verge of an epoch-defining revival. This dichotomy does not apply today. The overwhelmingly positive trend in Japan’s corporate governance must be set against the trickier situation it is facing in the currency markets.■Read more from Buttonwood, our columnist on financial markets: How to avoid a common investment mistake (Sep 21)Why diamonds are losing their allure (Sep 13th)Should you fix your mortgage for ever? (Sep 7th)Also: How the Buttonwood column got its name More

For sri lanka’s politicians September 27th was meant to be the light at the end of the tunnel. After more than a year of economic free fall—in which the former president fled protests, gdp shrank by 9% and billions of dollars of arrears piled up—the imf was in town, ready to release $330m from a bail-out agreed in March. There was even talk that the country’s creditors would reach a deal to cut back its debts.Yet the fund’s officials flew back from Colombo without releasing a dollar. The problem was two-fold: Sri Lanka’s tiny tax take and China, which is the country’s biggest creditor. The imf cannot lend more unless Sri Lanka restructures its debts, since the country owes so much elsewhere that officials cannot otherwise be sure they will get their money back. Therefore by refusing to take a haircut on its debts, China is holding up Sri Lanka’s restructuring—as it is in other indebted countries, too.image: The EconomistOn the same day that the imf officials departed, Bloomberg, a news service, reported that other national creditors, led by India, were working on a deal, and that it would not include China. They may end up insisting that Sri Lanka suspends repayments to China or forces it onto a comparable deal. Either would be almost impossible to enforce. Creditors usually only agree to something because everyone agrees to the same terms. Even creditors at war with one another usually manage to hash out a deal. The decision to proceed without China reveals the extent of the breakdown in sovereign-debt negotiations.It was hoped that a recent deal in Zambia, to which China signed up, would provide a template. But the solution was unique to the structure of Zambian debt, which allowed creditors to relabel some Chinese lending as private rather than public. And China only agreed to much of the compromise, which includes low interest rates and slower repayment, on the condition that it could back out if Zambia’s economy picked up. At a recent g20 summit, where the agenda ranged from cryptocurrencies to global tax, officials observed that debt restructuring was the issue on which the least progress had been made.Worse, middle-income countries like Sri Lanka cannot even get into the process through which Zambia secured its deal. The Common Framework, a g20 mechanism for creditors, only applies to poor countries. Middle-income ones must negotiate with China alone. Chinese officials refuse even to sit on a committee with the rest of Sri Lanka’s national creditors. Many economies near default today, from Egypt to Pakistan, are also too rich to qualify.Sri Lanka’s situation also exposes a worrying new fault line. Some think that China was put off joining Sri Lanka’s creditor committee because India was a co-chair. After all, it was willing to participate in Zambia’s committee, which it jointly led with France. Such tensions will only become more of a problem, since India’s lending is growing. Bradley Parks of William & Mary, an American university, suspects that India’s officials have decided to lend to countries already indebted to China to counter their rival’s influence. Future standoffs are therefore likely to be in places where both countries are big creditors.This week’s check-up was the first by the imf in a defaulting country in the Asia-Pacific region since the financial crisis there more than 20 years ago, when it doled out $35bn to Indonesia, South Korea and Thailand, and was so busy that South Koreans called events “The imf Crisis”. Then the fund was in the thick of things—now it can do little but sit and watch. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

One of the most anodyne phrases a central banker can utter is that they are “data-dependent”. It is a sophisticated way of saying that they do not know the future, and so will wait and see what the numbers look like. These days, though, declarations of data dependence by the Federal Reserve are more interesting: they sound like plaintive pleas rather than statements of the obvious. Many of the data points that allow the Fed, analysts and investors to understand the American economy are on the verge of disappearing, a casualty of the looming government shutdown.Congress faces a deadline of midnight on September 30th to pass a bill to keep the federal government funded. Given the stubbornness of hardline Republicans, who wield near-veto power in the House of Representatives, the chances that America’s legislature will miss the deadline are high and rising. The most recent government shutdown, which started towards the end of 2018, lasted for 35 days, meaning it could easily be November before federal employees get back to work this year.The straightforward economic impact of a shutdown is milder than often imagined. Unlike in the disastrous scenario of a debt-ceiling induced default, the government would continue to meet its mandatory obligations such as providing income support to the elderly. It is the so-called discretionary parts of federal spending—from crop insurance for farmers to money for highways—that would be halted. These account for about 27% of the government’s budget. A rule of thumb, based on past experience, is that each week of a government shutdown shaves about a tenth of a percentage point from the annualised rate of gdp growth in the quarter when it occurs. But when federal offices reopen, workers receive back-pay, and the hit to growth is mostly papered over.The less widely appreciated concern is that the government will be unable to collect and publish a wide array of the economic data that are the lifeblood of financial markets. Retail sales, housing starts, personal income, gdp and, most crucially, inflation—all these reports will be suspended while the government is shut. The blackout will be more of a problem than during the 2018-19 saga, because on that occasion the Bureau of Labour Statistics (bls), responsible for inflation figures, among others, had already received funding and so could continue to operate. If a shutdown starts next week, the bls would go offline, joining the Census Bureau and the Bureau of Economic Analysis, two other stalwarts of official statistics.The Fed’s policymakers would not be entirely bereft of information about the economy. For starters there are plenty of regular private-sector indicators of which they already make use: multiple reports on the job market, alternative indicators of inflation and surveys of both consumer and business sentiment. Financial information from banks and state-level figures, especially tax receipts, are useful. Plus the central bank has regional offices that will continue to collect data about their local economies. The problem, however, is that none of these fallbacks has the same combination of nationwide scope, methodological rigour and track record as, say, the bls’s consumer price index. “It would be very awkward for the Fed if it made a decision based on its own regional data, and then when the national data comes out, it’s actually quite different,” warns Joseph Wang, a former Fed trader.This risk could well tip the Fed towards being more doveish in its next interest-rate decision at the start of November. Why raise rates again if there is little visibility about how the economy is performing? If the government reopens and it turns out that inflation was too hot, the Fed could always catch up with a rate increase at its December meeting. By contrast, if the Fed raises rates in November and it then emerges that the economy has in fact slowed sharply, the central bank would have to consider reversing its move—far more awkward to explain than a slightly belated rate hike. The Republican hardliners who are driving the government to a shutdown do not want to be thought of as inflation doves, but that is the strange consequence of their intransigence. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Over the past year few currencies have done worse than Russia’s rouble. Last September an American dollar bought just over 60 of them. These days it will buy almost 100 (see chart 1). The drop is both a symbolic blow to ordinary Russians, who equate a strong currency with a strong country, and the cause of tensions in the Russian state. It has blown apart the consensus that existed among Russian policymakers last year, when the central bank and finance ministry worked hand in glove. Now, as inflation rises and growth slows, the two institutions are turning against one another. At stake is the country’s ability to wage war effectively.image: The EconomistDuring the conflict’s early stages, Russian officials had a straightforward task: it was their job to stop the economy collapsing. Immediately after the invasion began, this involved preventing people from pulling money out of the financial system, by implementing capital controls and doubling the policy interest rate. The rouble hit 135 to the dollar, before recovering. The economy nosedived and then improved (see chart 2). Funded by juicy revenues from sales of oil and gas, the finance ministry then kept the show on the road by lavishing spending on defence and welfare.image: The EconomistStrong oil-and-gas exports also caused the rouble to appreciate, lowering import prices and in turn inflation. This allowed the central bank to accommodate fiscal expansion, cutting interest rates to below where they had been on the eve of the invasion. Over the course of 2022 consumer prices rose by 14% and real gdp declined by 2%—a weak performance, but miles better than forecasters had predicted. Last week Vladimir Putin noted that “the recovery stage for the Russian economy is finished”.The new stage of the economic war presents officials with tough choices. Mindful of a presidential election in March, the finance ministry wants to support the economy. Bloomberg, a news service, has reported that Russia is planning to increase defence spending from 3.9% to 6% of gdp. The finance ministry also wants to raise social-security spending. Mr Putin is keen to run the economy hot. He recently boasted about Russia’s record-low unemployment rate, calling it “one of the most important indicators of the effectiveness of our entire economic policy” (conscription and emigration no doubt helped).Yet the central bank is no longer keen to assist. The problem starts with the rouble. It is sliding in part because businessfolk are pulling money from the country. Low oil prices for much of this year have also cut the value of exports. Meanwhile, Russia has found new sources of everything from microchips to fizzy drinks. Resulting higher imports have raised demand for foreign currency, cutting the rouble’s value.A falling currency is boosting Russian inflation, as the cost of these imports rises. So is the fiscal stimulus itself, warned Elvira Nabiullina, the central bank’s governor, in a recent statement. Consumer prices rose by 5.5% in the year to September, up from 4.3% in July. There are signs of “second-round” effects, in which inflation today leads to more tomorrow. Growth in nominal wages is more than 50% its pre-pandemic rate, even as productivity growth remains weak. Higher wages are adding to companies’ costs, and they are likely to pass them on in the form of higher prices. Inflation expectations are rising.This has forced Ms Nabiullina to act. In August the central bank shocked markets, raising rates by 3.5 percentage points and then by another percentage point a month later. The hope is that higher rates entice foreign investors to buy roubles. Raising the cost of borrowing should also dampen domestic demand for imports.But higher rates create problems for the finance ministry. Slower economic growth means more joblessness and smaller wage rises. Higher rates also raise borrowing costs, hitting mortgage-holders as well as the government itself. Last December the finance ministry decided it was a good idea to rely more heavily on variable-rate debt—just as borrowing costs began to rise. In August, conscious of higher rates, it then cancelled a planned auction of more debt.Mr Putin would like to square the circle, defending the rouble without additional rate rises. He has therefore asked his policymakers to find creative solutions. Two main ideas are being explored: managing the currency and boosting energy exports. Neither looks likely to work.Take the currency first. The government is keen to mandate exporters to give up more hard cash and make it harder for money to leave the country. In August officials started preparing “guidelines” that would “recommend” firms return not just sale proceeds but also dividend payments and overseas loans. On September 20th Alexei Moiseev, the deputy finance minister, hinted that capital controls were being considered to stem outflows to every country, even those deemed “friendly”.Such measures are, at best, imperfect. Russia’s export industries form powerful lobbies. The experience of the past 18 months is that the firms which dominate energy, farming and mining are skilled at poking loopholes in currency controls, says Vladimir Milov, a deputy energy minister in the early days of Mr Putin’s reign. Waivers and exemptions abound. In late July Mr Putin issued a decree allowing exporters operating under intergovernmental agreements, which cover a big chunk of trade with China, Turkey and others, to keep proceeds offshore.Civil warThe Kremlin also wants to create artificial demand for the rouble by forcing others to pay for Russia’s exports in the currency. Central bankers seem to think this plan is pretty stupid. “Contrary to popular belief,” as Ms Nabiullina noted in a speech on September 15th, the currency composition of export payments has no “notable impact” on exchange rates. The only thing that changes is the timing of the conversion. Either an exporter paid in dollars uses them to buy roubles, or the customer buys the roubles themselves. What might help Russia more would be to pay for more of its imports in domestic currency so as to save foreign exchange—and then for foreign sellers to keep hold of those roubles. But there is little sign of that happening.Russia might consider using its foreign reserves to intervene in currency markets. Yet more than half of its $576bn-worth of reserves, held in the West, are frozen. Using the rest is hard because most of Russia’s institutions are under sanctions that limit their ability to conduct transactions, says Sofya Donets, a former Russian central-bank official. And the country’s available reserves, which have shrunk by 20% since before the war, could only defend the rouble for a little while anyway.image: The EconomistShort of raising rates, the only workable way to support the rouble is to boost energy exports. In theory, two factors are working in Russia’s favour. One is a rising oil price. Since July production cuts by Saudi Arabia and receding fears of a global recession have helped raise the price of Brent crude by nearly a third, to $97 a barrel. The other factor is a narrowing gap between the price of Urals, Russia’s flagship grade, and Brent, from $30 in January to $15 today (see chart 3). This gap is likely to continue to shrink. Since December members of the g7 have barred their shippers and insurers from helping to ferry the fuel to countries that still buy it unless it is sold under $60 a barrel. Russia’s response has been to build a “shadow” fleet of tankers, owned by middlemen in Asia and the Gulf, and to use state funds to insure shipments.However, Russia’s oil-export proceeds will probably not rise more. Higher prices may depress consumption in America; China’s recovery from zero-covid seems over. Reid l’Anson of Kpler, a data firm, estimates that America, Brazil and Guyana could together increase output by 670,000 barrels a day next year, making up for two-thirds of Saudi Arabia’s current cuts. Futures markets suggest that prices will fall during much of 2024. Although Russia could export more oil to make up for this, doing so would accelerate the slide.The other bad news for Russia is that it must now earn more from oil merely to keep its total export revenue flat, owing to declining gas sales after the closure of its main pipeline to Europe. In the fortnight to September 19th these were a paltry €73m ($77m), compared with €290m last year. There is talk in the eu of curbing imports of Russian liquefied natural gas. Europe’s nuclear-power generators are also cutting their dependence on Russian uranium.All this means that, as Russia’s inflation troubles persist, the tussle between the government and the central bank will only intensify. The temptation to splurge ahead of the presidential vote next year will fan tensions, forcing the central bank either to crank up rates to debilitating levels or to give up the fight, leading to spiralling inflation. Alternatively, Mr Putin could cut military spending—but his plans for 2024 show he has little interest in doing that. The longer his war goes on, the more battles he will have to fight at home. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More