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Now, news!

Matt Davis — Need2Know Chedditor

Table of Contents

• ‘Sovereign Debt Doom Loop’ Picks Up Steam

• Court Says ‘Prediction’ Markets Are Gambling

• The Billable Hour Meets Its AI Maker

• Why We Went Back to the Movies This Summer

• Poll of the Day: Movie Madness

• Poll of the Day: You’re Pro Pre-Nup

What’s the Stock Market Up To, Eh?

$SPX ( ▼ 0.71% )  $DJI ( ▼ 0.79% )  $NDX ( ▲ 1.59% )  

Companies Mentioned in Today’s Newsletter

$KALSZZX ( ▲ 0.54% )  $MS ( ▼ 1.07% )  $C ( ▲ 0.7% )  $F ( ▼ 0.72% )  

‘Sovereign Debt Doom Loop’ Picks Up Steam

Have you ever bought an expensive concert ticket, only to watch the venue release better, cheaper tickets the next day while your favorite band starts playing elevator music? That, in the simplest possible terms, is why investors are currently throwing their government bonds into the global wood chipper.

You see, a bond is just a glorified government IOU that pays you a fixed interest rate. But suddenly, inflation is back like an unwanted houseguest, driven by surging energy costs. To make matters worse, central banks are planning to raise interest rates to fight it. If interest rates go up, new bonds will pay much more than your current, sad little IOU.

Why would anyone keep holding an old, low-paying bond when shiny, high-paying ones are on the way? Exactly: They wouldn't. They dump them. And because bond prices and yields move in opposite directions, this massive fire sale has pushed yields to horrifying peaks not seen in decades, with UK borrowing costs hitting their highest level since 2008 and Japan's touching 1990s levels.

To add to the chaos, governments, from Andy Burnham in the UK to Sanae Takaichi in Japan, are on massive spending sprees, requiring them to print even more debt to fund stimulative packages. As Mike Bell of RBC BlueBay Asset Management told the Financial Times yesterday, this is "happening against a backdrop where you are seeing a lot more government and corporate bond supply." Tech giants are also borrowing heavily to fund their AI obsessions.

Craig Inches of Royal London Asset Management aptly summed up this circus as a “doom loop” where “you aren’t getting any respite.” Meanwhile, Eric Robertsen of Standard Chartered said, “The fiscal situation is not improving anywhere.”

The bond sell-off matters to your 401(k) because rising bond yields push down existing bond fund prices and can trigger broader stock market volatility. So far, equities are holding up. But it’s a troubling picture.

Quote of the Day

Court Says ‘Prediction’ Markets Are Gambling

Unfortunately for Kalshi’s $KALSZZX ( ▲ 0.54% ) dreams, the Ninth Circuit Court of Appeals has ruled that states can regulate prediction markets as gambling. In Nevada, which sued Kalshi for "unlicensed operations," the gig is up temporarily.

Judge Ryan Nelson didn't buy the corporate rebranding, writing in his opinion that Kalshi's "sports event contracts were not ‘swaps’ because they were sports bets." Nevada’s Attorney General Aaron Ford was thrilled: "The Ninth Circuit rejected that argument and made clear what we have maintained from the beginning: Sports betting does not become something else simply because a company calls it an ‘event contract.’"

It turns out that placing massive trades on elections, sports, or reality TV isn't a complex hedge against risk — it’s just a bet. At least in the eyes of the Ninth Circuit.

Now the federal regulators at the Commodity Futures Trading Commission (CFTC) are crying foul. CFTC spokesman Zach Fulton grumbled that the court "erred today" and accused it of "inventing a new exception to the Commodity Exchange Act." Fulton warned that the decision "teed up a circuit split that calls out for resolution by the Supreme Court," given a previous ruling in Philadelphia that favored the "swaps" definition.

Naturally, Kalshi isn't folding its hand. Spokeswoman Dani Lever declared, “We will be seeking further review.”

Until the Supreme Court officially weighs in on this linguistic gymnastics routine, we are left in regulatory limbo. But look on the bright side: If you want to bet on the Supreme Court's decision, you can probably find an "event contract" for that on Kalshi.

The Billable Hour Meets Its AI Maker

It’s a battle of the titans, or perhaps a battle of who can overcharge whom. Wall Street's biggest banks — institutions not traditionally known for their philanthropic crusades against high fees — are demanding that Big Law slash its bills. The culprit? AI.

For decades, the legal industry’s "leverage model" has been a license to print money: Recruit bright-eyed, sleep-deprived junior associates, charge clients eye-watering rates to have them proofread contracts at 2 a.m., and buy the equity partners another yacht. But now that an AI can scan millions of documents in seconds, the banks are calling time.

As Eric Grossman, Morgan Stanley’s $MS ( ▼ 1.07% ) general counsel, noted to the Financial Times, top lawyers have “for a long time been compensated on the foundation of [associates billing for long hours],” meaning “their compensation model is now extraordinarily unstable.” Morgan Stanley is moving to competitive bidding, while Adam Meshel, global head of legal at Citigroup $C ( ▲ 0.7% ) , made the bank's expectations crystal clear: “If the number of hours they’re working on a matter has come down because of AI… our expectation is for costs to come down significantly per transaction.”

Naturally, Big Law is trying to justify its average $798-an-hour associate billing rates. Sam Newhouse of Latham & Watkins argued that while some tasks are “low-hanging fruit,” sophisticated clients are simply using AI's “extra time and the extra data” to “strike better deals.” 

But corporate clients aren't buying it. Ford’s $F ( ▼ 0.72% ) general counsel, Steven Croley, said that AI's benefits are “not showing up in billing relief. Warning of a “shift of the tectonic plates,” he concluded, “The pyramid economic model [of law firms], I would not bet on that.”

So, shed a tear for the $800-an-hour corporate associate. Their late-night pizza sessions might soon be replaced by a server rack. And your legal bills could drop accordingly.

Song of the Day: Temper City, ‘Reverse Psychology’

Here’s a brilliant alternative-pop anthem that balances raw relationship drama with infectiousness. The track shifts from stripped-back, ambient verses driven by a funky Moog bassline into a massive, guitar-heavy chorus built for the big stage. So, it’s a lot like this newsletter.

Why We Went Back to the Movies This Summer

"If you build it, they will come." That ancient Field of Dreams wisdom is apparently the groundbreaking secret behind Hollywood’s massive $4.5 billion summer box-office rebound, a staggering 20% jump from last year.

After years of media analysts predicting the death of movie theaters, Screen Engine CEO Kevin Goetz has revealed that the magical savior of the silver screen is... releasing movies people want to watch. Groundbreaking, I know.

While streamers have successfully "hijacked convenience," Goetz notes that theaters continue to "own experience." It turns out that digital natives, tired of doomscrolling on TikTok alone in their bedrooms, are actually craving real life. Gen Z isn't saving the business out of pure charity; they are showing up because "there's product that interests them." Having grown up with devices, they are "more apt now to wanna find places where they can socialize, where they could be with other people" and "to actually have human connection.”

Yes, you read that right. Young people are paying to sit in a dark room with actual, breathing strangers. And they’re paying dearly for it. With average adult ticket prices at "$13.46" and premium formats reaching "$18.22," Goetz notes that taking a family is "not cheap" when you factor in "concessions, plus parking."

Yet, audiences gladly left their homes to join the "cultural conversation." They flocked to crowd-pleasers like Spider-Man: Brand New Day, Christopher Nolan’s epic The Odyssey, and grassroots hits like Obsession — which Goetz points out was "made for a million dollars and will be grossing $500 million worldwide.”

So, what’s the ultimate takeaway? If Hollywood wants to keep this momentum, it needs more original stories as opposed to endless "rehashes, remakes, and sequels." Otherwise, we’ll gladly return to our couches, where the snacks are cheap and we don’t have to pretend we like other people.

Free Yourself From Advertising Forever!

Why These People Made Time’s AI 100 List

Four years ago, the TIME100 AI list was simple: You find the guys who built the chatbots and put them on a pedestal. But according to TIME senior editor Ayesha Javed, the industry is evolving so rapidly that there is "never a shortage of new people" to consider.

And by "new people," she doesn't just mean tech executives who look like they sleep in server racks; this year's list features a bizarrely star-studded cocktail party of characters. Alongside the usual suspects like Sam Altman and Elon Musk, we have Joseph Gordon-Levitt. Why? Because when he isn't starring in indie films, he's warning us about "the concentration of power within the industry" and writing an AI thriller.

Then there’s Senator Bernie Sanders, who made the cut by focusing on the "potential labor impacts, the impact on privacy and also mental health" of AI. Even environmental crusader Erin Brockovich has arrived, launching a website to monitor the massive "new data centers popping up across the U.S."

The message is clear: AI has successfully "infiltrated all of our lives." It's in our pockets, on our phones, and in Liz Reed's AI-summarized Google searches. Yet, Javed notes that the biggest misconception is "how much influence humans still have" to shape this wild ride. We aren't helpless; lawmakers, artists, and advocates still have "agency around the technology.”

Whether that agency will survive the impending Anthropic $ANTHZZX ( ▼ 1.01% ) and OpenAI $OPEAZZX ( ▼ 0.36% ) IPOs is anybody's guess.

Should You Check Your 401(k) Today?

👎️ 

Nope.

Poll of the Day: Movie Madness

Poll of the Day: You’re Pro Pre-Nup

We asked: Where are you on prenuptial agreements?

You answered:

🟨⬜️⬜️⬜️⬜️⬜️ I'm extremely pro-prenup. I worked hard for this vintage Pokémon card collection, and I will not watch it get divided in half by a judge. (33)
⬜️⬜️⬜️⬜️⬜️⬜️ I believe in true, unconditional, forever love — right up until paragraph 14, subsection B, regarding the streaming passwords and the good cast-iron skillet. (19)
🟨🟨🟨⬜️⬜️⬜️ Nothing says "I want to spend the rest of my life with you" quite like hiring competing legal counsel before we've even picked out the cake. (78)
🟩🟩🟩🟩🟩🟩 Honestly, it’s just responsible planning. If our marriage is going to crash and burn, I want the flight recorder and the emergency exits clearly mapped out in advance. (145)
🟨🟨🟨🟨⬜️⬜️ A prenup? In this economy? The only thing we’d be negotiating is joint custody of a starter apartment and a 2011 Honda Civic. (104)
379 Votes via @beehiiv polls

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