Andrew here. Keep your eyes on a corner of the market that hasn’t gotten enough attention: private credit. The bankruptcy of the auto parts maker First Brands Group is now hitting firms like Jefferies and UBS, which were among those that had lent money to the company. We’ve got more details about the dominoes that are now falling.
We’re also taking a look at the U.S. government’s multibillion-dollar bailout of Argentina — and questions it is raising.
Pushback against a U.S. lifeline for Buenos Aires
America has finally come to Argentina’s rescue, as the Trump administration aims to stabilize the embattled South American country’s economy and help out Javier Milei, the Argentine leader and an ally of President Trump.
But critics of the move note ties between investors in Argentinian assets and Trump officials, and they have raised concerns that the administration is extending the aid during the U.S. government shutdown.
The details: Treasury Secretary Scott Bessent said that the U.S. directly purchased Argentine pesos amid a run on the currency that forced Buenos Aires to spend billions of dollars to counteract it. Bessent added that the U.S. had also “finalized a $20 billion currency swap framework” with the Argentine central bank, though more information hasn’t been released.
Bessent said that the move was in the U.S.’s strategic interest by creating a strong, stable Argentina to help “anchor a prosperous Western Hemisphere.” Others point out that the country has significant supplies of minerals like lithium and copper that are crucial for U.S. and global manufacturing.
The package comes as relief for big global investors who have made bets on Argentina, many of whom bought up government debt on the cheap in hopes that it will be repaid or renegotiated, The Times notes. Among them:
Funds at money managers including BlackRock, Fidelity and Pimco. One Fidelity vehicle this summer credited returns from its Argentine bet with helping compensate for losses in other emerging-market countries.
Stan Druckenmiller, who mentored Bessent at Soros Fund Management. His Duquesne Family Office was the second-largest investor in Argentina’s principal exchange-traded fund.
Robert Citrone, who founded Discovery Capital Management and who has claimed credit for persuading George Soros and Bessent to bet against the Japanese yen in 2013, a hugely profitable investment. Citrone had been in touch with Bessent in the lead-up to Bessent’s announcement last month that the U.S. would help Argentina, arguing that a peso crash would hurt Milei politically, The Times reports.
The move has drawn political blowback for the Trump administration. While Bessent has argued that the U.S. wouldn’t bail out Argentina, skeptics said the move is exactly that. “It’s a country in crisis, it’s running out of dollars, and the U.S. is giving the country dollars,” Monica de Bolle, a senior fellow at the Peterson Institute for International Economics, told The Times. “That’s a bailout by definition.”
A group of Democratic senators on Thursday introduced legislation meant to prevent the Treasury Department from using a special fund to help Argentina. (It’s unlikely to pass.)
“It is inexplicable that President Trump is propping up a foreign government, while he shuts down our own,” said Senator Elizabeth Warren of Massachusetts, who helped draft the legislation. “Trump promised ‘America First,’ but he’s putting himself and his billionaire buddies first and sticking Americans with the bill.”
And as we’ve written before, American soybean farmers have grumbled about aid for Argentina, which has sold more than 2.5 metric tons of soybeans to China as Beijing halts its purchases from the U.S. (The Trump administration has said it will offer help to American farmers.)
HERE’S WHAT’S HAPPENING
The Consumer Price Index report for September is coming out — at some point. The Bureau of Labor Statistics has called back some workers to help release the data, despite the government shutdown, The Times reports. The move was tied to the annual process of adjusting Social Security benefits to account for cost-of-living changes; the report’s release date isn’t known but is likely before Fed policymakers meet to vote on interest rate changes at the end of the month.
Letitia James is the latest Trump foe to face federal charges. James, the New York attorney general, was indicted on accusations of bank fraud and making a false statement, by the same handpicked federal prosecutor who is leading a similar case against James Comey, the former F.B.I. director. Critics of the move said it represented the further weaponization of the Justice Department by President Trump against his adversaries, a list the president has said includes the investors George Soros and Reid Hoffman.
Zohran Mamdani maintains a big lead over Andrew Cuomo in the New York mayoral race. Mamdani, the Democratic nominee, is ahead of Cuomo by 13 points with a month before the election, according to a new poll by Quinnipiac University. It’s unclear how the findings will affect the plans of the city’s business donors.
The fallout from a costly auto supplier’s bankruptcy
First Brands Group isn’t exactly a household name. But the auto parts maker’s bankruptcy filing late last month has led to a rapidly widening shock across the global financial community.
Lenders and investors are tallying up what now looks like billions in losses, while federal prosecutors are said to be getting involved as well.
What happened: First Brands, which makes oil filters and windshield wipers, sought Chapter 11 protection last month after discovering accounting irregularities. What is emerging is a complicated web of off-balance-sheet debt — on top of $6 billion in balance-sheet debt — as the company repledged assets multiple times to different lenders.
Raistone, a lender that worked extensively with First Brands and is calling for an independent court examiner, said that as much as $2.3 billion “simply vanished” from First Brands’s books.
An array of financial firms has been hit. Jefferies disclosed that one of its asset-management units is owed $715 million from customers that bought First Brands products. A UBS fund disclosed to investors that about 30 percent of its portfolio was linked to the bankrupt manufacturer.
Raistone said it is owed at least $172 million. (One sign of how complicated this all is: Raistone is partly owned by a UBS fund.) And insurers including Allianz and AIG are preparing for a potential flood of claims related to First Brands, according to The Financial Times.
A big question: Does First Brands’s failure underscore just how frothy and complacent the credit markets have become, especially amid the boom in so-called private credit?
“I suspect we’re going to see more of these things, like First Brands and others, when the cycle ultimately reverses,” Jim Chanos, the prominent short seller, told The FT.
Exclusive: Kalshi’s big new fund-raising round
It’s been an eventful week for prediction markets, the digital platforms where users can bet on nearly anything: political elections, N.F.L. games, the next pope and more.
The latest news comes from Kalshi, a big player in the field, which will announce on Friday that it has raised more than $300 million in new funding and will open to international bettors, Michael de la Merced is first to report.
The new round values Kalshi at $5 billion, up from a $2 billion valuation set in June, according to the data provider PitchBook. The round was led by Sequoia Capital and Andreessen Horowitz; other investors included Paradigm, CapitalG, Coinbase Ventures, General Catalyst and Spark Capital.
The company and its industry have grown by leaps and bounds since last year, when prediction markets started to gain mainstream popularity after they correctly called the 2024 U.S. presidential election.
Kalshi’s growth was supercharged by its allowing of sports bets on its platform — and especially after it began offering the complex wagers known as parlays that had previously been reserved for sports books. (That move battered the stock prices of more traditional gambling sites like DraftKings.)
Kalshi has also benefited from a series of deals that allow customers of brokerages like Robinhood and Webull to bet on contracts directly from those sites, just as easily as they can buy stocks.
Meanwhile, a chief rival, Polymarket, said this week that it would receive up to $2 billion in investment from the Intercontinental Exchange, the owner of the N.Y.S.E.
Kalshi had more than $1 billion worth of trading volume this week. That puts it on track for $50 billion in volume on an annualized basis — and a huge jump from the roughly $300 million in annualized volume it had last year before it opened its election market.
It also overtook Polymarket late last month as the market leader, with a share of more than 60 percent by the end of September, according to the data provider Dune. “We have not expected this level of growth,” Tarek Mansour, a Kalshi co-founder and its C.E.O., told DealBook.
Kalshi is growing internationally, too. Until now, the company operated only in the U.S., where it was the first platform to offer election-related contracts after a federal court took its side in a fight with the Commodity Futures Trading Commission.
Kalshi will now operate in more than 140 countries, though only via its website and not also through online brokerages.