The Daily Spark

The US Gulf Coast diesel crack spread cleared $100/bbl for the first time on record in August against a normal range of $15 to $30. Unlike a gasoline spike, which lands on consumers as a one-time tax on discretionary spending, diesel is an intermediate input embedded in the delivered cost of nearly every physical good, from freight and rail to agriculture and construction.

That means the rise in diesel prices does not stay in the energy line of the CPI but migrates with a lag into core goods and services, which is exactly the kind of pass-through the Fed cannot dismiss as transitory.

The bottom line is that diesel margins are now setting the long end of the curve because diesel crack spreads are an important driver of future core inflation.

After a decade of reaching for yield in a zero-rate world, investors no longer have to take outsized risk to generate income. Even if yields rise further from here, current levels in high-quality fixed income are already attractive, both for households and for investors with long-duration liabilities.

The credit story in hyperscalers rests on a single consensus assumption, that operating cash flow triples from $600 billion to $2 trillion, see chart below.

If this doesn't happen, then the risk is that the AI trade weakens, with credit spreads widening, capex plans getting cut and ultimately US GDP growth slowing.

Major copper discoveries, meaning deposits with at least 500,000 tonnes of contained copper, have fallen from double digits annually in the 1990s and 2000s to one or two in recent years, with none in 2025. Because a new deposit takes roughly 18 years to reach production, the chart below describes supply in the 2040s.

Meanwhile, the AI data center buildout is adding copper-intensive load on a two- to three-year cycle, pointing to a structurally tighter market and upward pressure on prices.

The income that lifted America's top 1% did not come mainly from tech or Wall Street, according to The Everywhere Millionaire. More than half of the rise in the top 1% income share since 1985, 5.8 of 10.5 percentage points, flowed through pass-through businesses, see chart below.

The authors, Owen Zidar and Eric Zwick, counted roughly 3 million wealthy private business owners, with average net worth near $25 million, running law firms, car dealerships, medical practices, commercial contractors and regional restaurant chains, the kind of businesses that make their owners wealthy and well known in their own communities without ever making them nationally famous.

Fed Chair Kevin Warsh has been remarkably consistent. He has repeatedly said the Fed will deliver price stability. Wednesday’s rate hike shows that he means it.

There is another important parallel with former Fed Chair Paul Volcker: no forward guidance. Volcker did not tell markets what the Fed would do at the next meeting. Warsh takes the same approach.

The bottom line is that Warsh is following the number one principle for successful central bankers: say what you do, and do what you say.

Securitization of US data center debt has totaled $81.4 billion since 2018, of which $18 billion was in 1H 2026 alone, see the first chart below. The EU has seen just $1.7 billion, of which $0.9 billion was in 1H 2026. The UK is little better, with $2.3 billion since 2018, of which $1.1 billion was in the first half of the year.

The gap extends beyond just data centers to other strategic assets. US solar securitizations have raised $29.3 billion since 2018, compared with just $1.1 billion in the EU, see the second chart below.

Part of the problem has been overly burdensome securitization rules compounded by insurance regulations that have discouraged European life insurers. EU life insurers hold just 0.33% of their investment assets in securitizations, compared with roughly 17% for US life insurers, despite the two industries being similar in size. The EU has proposed tweaks to its securitization rules, but the changes are modest relative to the scale of the financing challenge.

If Europe wants to narrow the AI investment gap with the US, it will be harder if one of the markets helping finance the US data center buildout remains largely closed in Europe.

Written by Huw van Steenis, London

The widening in hyperscaler CDS is not driven by dealer hedging of new issuance. If it were, bank CDS would be widening too, given that banks remain the single largest source of IG supply, and instead bank spreads have sat flat near 40 bps. What the market is repricing is hyperscaler credit fundamentals, namely a debt-financed AI capex cycle with rising leverage, negative free cash flow and uncertain payback on depreciating assets.

The chart below, from the new book The Everywhere Millionaire, shows that the 400 wealthiest Americans on the annual Forbes list hold about $4 trillion in combined wealth, while the far larger group of private business owners with at least $10 million in net worth holds $46.7 trillion.

Built from the Fed's Survey of Consumer Finances and backed by the authors' decade of work inside de-identified IRS records, the comparison suggests most top-end wealth in the US does not sit with a few household names but with millions of business owners in towns and mid-size cities across the country.

Canada is hosting its Investment Summit over the coming days.

A recent report projected Canada will need US$4.7 trillion in infrastructure investments by 2050, spanning roads, bridges, waterworks, hospitals, data centers and defense. Energy/natural resources are the #1 bucket at one third of this, or $1.6 trillion.

Canada's investment in machinery and equipment is still below where it was in 2007, 19 years on (inflation adjusted). Broader business investment has barely grown, underperforming even the euro area, while the US has expanded steadily, although business investment stirred in Q2, see charts below.

The bottom line is that reversing this requires a step change in business conditions and capital investment from both the public and private sectors. The Investment Summit, co-organized with CPP Investments and PSP Investments, is targeting $1 trillion of fresh investment over five years, particularly focused on energy projects and large-scale infrastructure. It will be a useful lens on how that ambition translates into projects and committed capital.

Written by Huw van Steenis, London