Good Morning! Silicon Valley hardware is having a moment again as VC flows into startups building robots and semiconductors. Jalen Brunson is launching a new management group with his mom and sister focused on his ‘off-court business.’ And BlackRock is planning to make the corporate 401(k) look more like a pension.

Apollo warned that credit default swaps for hyperscaler debt show the bonds have grown riskier. Companies are struggling to explain their own AI investment returns. And airline pilots are becoming millionaires, but their finances remain highly volatile.

Plus: Blackstone is working through a backlog of withdrawal requests from its flagship private credit fund and says it's confident the asset class will recover, OpenAI considering pre-IPO funding at a $1.2T valuation, and why we hesitate to contact old friends.

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SQUEEZ OF THE DAY

Warsh Hikes

Kevin Warsh's first major decision as Fed chair turned out to be a consequential one: the Fed is raising interest rates for the first time in more than three years. And it comes at a time when the president who appointed him is demanding rates go in exactly the opposite direction.

The Fed unanimously raised rates 25 basis points yesterday to 3.75%-4%. It's the first hike since July 2023, and policymakers pointed to stubborn inflation as the reason for the shift back into tightening mode. Warsh said the Fed was removing a "dose of accommodation" and needed to show it was serious about getting inflation under control.

With core inflation above 3% and energy prices surging, the Fed now expects headline inflation to finish the year at 3.7%, with 2% not arriving until 2029. More importantly for markets, officials' median year-end rate forecast jumped from 3.8% in June to 4.1%, with 16 of 18 policymakers expecting at least one more hike this year.

Higher rates usually aren't great news for stocks because they make borrowing more expensive and raise the discount rate investors use to value future earnings. But markets didn't tank, and investors read the move as the Fed trying to convince bond buyers that inflation won't be allowed to run away. With the 10-year Treasury recently crossing 5%, Wall Street is betting that letting those fears become entrenched would be far worse than another quarter-point hike.

The Fed also doesn't think it's hiking into a collapsing economy. Officials raised their 2026 growth forecast to 2.3% and lowered their unemployment forecast from 4.3% to 4.1%, essentially arguing the economy can handle more tightening. So Warsh has to thread the needle of bringing inflation down without breaking an economy that still looks resilient.

Trump spent years publicly pushing Jerome Powell to lower rates, then appointed Warsh expecting policy to get easier. Hours after the decision, Trump said U.S. rates should be 1% or lower and demanded they come down quickly. Warsh was asked what message he had for Trump and declined to answer, but the message from the rate decision itself wasn't hard to read: for now, the inflation data won.

Takeaway: Warsh inherited the same uncomfortable job Powell had. Wall Street would love cheaper money, the White House is publicly demanding it, and inflation isn't cooperating. His first move was to side with the data and hike anyway. If that restores enough Fed credibility to keep long-term yields from running away, 25 basis points could eventually look like cheap insurance. But if inflation stays hot and the 10-year keeps climbing, investors get the much uglier combination of higher Fed rates and higher borrowing costs everywhere else.

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HEADLINES

Top Reads

• In Silicon Valley, hardware is having a moment again (NYT)

• Jalen Brunson launching new management group with mom and sister focusing on 'off-court business' (NY Post)

• How BlackRock plans to make the corporate 401(k) look more like a pension (WSJ)

• Hyperscaler debt signals warning sign, Apollo cautions (CNBC)

• Companies struggle to explain their own AI investment returns (WSJ)

• Airline pilots are becoming millionaires — but their finances remain highly volatile (WSJ)

• Flows will return to private credit, Blackstone's Gray tells NZZ (BB)

• OpenAI investors have approached the company about a new funding round (CNBC)

• Reddit co-founder says tech industry has been 'tone deaf' in explaining AI: 'Misinformation flying around' (CNBC)

• Tropical Smoothie Cafe announces new branding, plans for new locations (CNBC)

• Revolut CEO found $350 million yacht's ex-owner via ChatGPT, his lawyers say (BB)

• AI is not yet driving drug development (Axios)

• CEO confidence in the economy at 4-year high (Axios)

• Dutch buyout firm Main Capital to acquire edtech company Watermark Insights (WSJ)

• Starbucks considers selling majority stake in its Japan business (CNBC)

• Musk backer Valor hands investors $8.5 billion of SpaceX stock (BB)

• Congressional Democrats take aim at private equity's role in medicine (WSJ)

• Venture investors find liquidity fix outside IPO market (BB)

CAPITAL PULSE

Markets Rundown

Market Update

• The Dow fell 1.2%, the S&P 500 fell 0.5%, and the Nasdaq was flat after the Fed raised rates for the first time in three years.

• The 2-year Treasury yield rose 7 basis points while the 10-year was broadly unchanged.

• WTI crude slid almost 4% to $102 on headlines that Middle East supply outages might be resolving.

Economic Data

• Retail sales rose 1.2% in August, more than reversing July's 0.5% decline.

• Spending was broad-based, with all subsectors except building materials posting gains.

• The rebound points to resilient consumer spending despite higher rates and oil prices.

The Fed

• The FOMC raised rates 25 basis points unanimously, with 16 officials penciling in at least one more hike this year.

• Chair Warsh called the move "removing a dose of policy accommodation," signaling he doesn't see policy as restrictive yet.

• The 2027 median rate forecast is 4% to 4.25%, though 8 members see rates higher.

Movers & Shakers

• (+) SpaceX ($SPCX) +5% after confirming its Starship rocket's next orbital test flight is scheduled for September 22.

• (–) Robinhood ($HOOD) -5% because the U.S. Attorney's Office charged two of the trading platform's engineers with fraud.

• (–) JB Hunt ($JBHT) -13% after the trucking and logistics company warned that Q2-to-Q3 earnings could fall 5–10% due to surging diesel.

Prediction Markets

• Bank of Japan rate decision comes tonight around 11pm EDT.

• Trade on real-world events with Kalshi. Use code OWS to get a $10 bonus when you trade $10.

Private Dealmaking

• Brookfield Asset Management agreed to acquire Reliance Worldwide, a plumbing supplies manufacturer, for $2.9 billion

• Factory, an AI coding startup, raised $200 million

• Euclyd, a Dutch chipmaker, raised over $215 million

• Wonder raised $125 million in Series D funding

• Caddi, a manufacturing automation firm, raised $114 million

• Thatch, a health benefits company, raised $108 million

For more PE, VC & M&A deals, subscribe to our Buysiders newsletter.

BOOK OF THE DAY

The Everywhere Millionaire

Description:
Owen Zidar and Eric Zwick uncover a largely overlooked source of American wealth: the owners of successful private businesses on Main Street. Drawing on a decade of research and unprecedented data linking private businesses to their individual owners, the authors show how fortunes have been built through businesses such as auto dealerships, restaurants, convenience stores, manufacturing companies, and other often-uncelebrated enterprises. Rather than focusing on famous billionaires from Wall Street or Silicon Valley, the book examines the entrepreneurs who quietly accumulated substantial wealth through ownership, cash flow, tax structures, and long-term business building. It also explores how these fortunes influence economic opportunity, inequality, and political power, offering a different perspective on who actually holds wealth in America and how they got there.

Book Length: 368 pages
Release Date: September 15, 2026

Ideal For:
Entrepreneurs, investors, business owners, economists, private equity professionals, and anyone interested in wealth creation, small businesses, taxation, inequality, and the economics of entrepreneurship.

“Some of America's greatest fortunes aren't built in Silicon Valley or on Wall Street. They're built quietly by owning ordinary businesses for a very long time.”

DAILY VISUAL

Investors Are Now Paying Close Attention to Rates

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DAILY ACUMEN

Programmed Panic

By October 1987, a hedging strategy called portfolio insurance had become enormously popular among institutional investors, managing tens of billions of dollars. The idea was simple and individually sound: if the market started falling, computer programs would automatically sell stock index futures to limit the damage to each portfolio holding it.

On October 19, a day that became known as Black Monday, the market began to dip, and those programs did exactly what they were built to do. They sold. That selling pushed prices down further, which triggered more automated selling from the same programs across different firms, which pushed prices down again, in a feedback loop that had never been tested at scale. By the end of the day the Dow had fallen 22.6 percent, still the largest single day percentage decline in its history, erasing roughly 500 billion dollars in a single session.

Every individual portfolio's hedge had been rational in isolation. Nobody had modeled what happens when thousands of identical hedges fire at the exact same moment. Protection that works perfectly for one participant can become the mechanism of collapse the instant everyone is running the same protection simultaneously.

ENLIGHTENMENT

Short Squeez Picks

• Steve Jobs said great leaders make 1 difficult choice most managers avoid

• Why we hesitate to contact old friends

• Why restaurant servers clear your plate before everyone finishes eating

• A guide to the best Italian food in NYC

• The YC startups betting on what comes next

MEME-A-PALOOZA

Memes of the Day

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