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Investor famed for spotting Enron fraud sounds alarm on Wall Street’s booming debt machine

Jim Chanos, one of Wall Street’s best-known short sellers, has sounded the alarm on the private debt boom, telling the Financial Times that First Brands Group’s chaotic bankruptcy could augur a wave of corporate collapses.

Some of the biggest names on Wall Street are facing the prospect of multibillion-dollar losses from the bankruptcy of First Brands, a heavily indebted maker of spark plugs and windscreen wipers based in Ohio.

First Brands has now disclosed almost $12bn in debt and off-balance sheet financing built up in the years before its Sunday bankruptcy filing, which also ensnared less well-known private lenders such as a Utah-based leasing specialist.

“I suspect we’re going to see more of these things, like First Brands and others, when the cycle ultimately reverses,” Chanos told the Financial Times, “particularly as private credit has put another layer between the actual lenders and the borrowers.”

Chanos, 67, cemented his reputation shorting energy trader Enron, which like First Brands made substantial use of off-balance sheet financing and whose $70bn collapse heralded the onset of the 2001 stock market crash.

He announced in 2023 that he was closing his main hedge funds after more than three decades, while continuing to offer bespoke advice on fundamental short ideas as well as some macro insights.

In a 2020 Lunch with the FT interview, Chanos said financial markets were in “the golden age of fraud”. On Thursday he said this phenomenon had “done nothing but gallop even higher” since he made the remark.

First Brands has not been accused of fraud. However, a bankruptcy probe into its byzantine off-balance sheet financing is examining whether the company pledged the same invoices multiple times. This investigation has also uncovered that debt collateral may have been “commingled”. 

The FT has previously reported that the group’s founder and owner, low-profile businessman Patrick James, was previously sued by two lenders that alleged that fraudulent conduct had exacerbated their losses.

James strongly denied the allegations of fraud in the two cases, which were both dismissed after settlements were reached. 

First Brands and James did not respond to a request for comment.

Chanos likened the near $2tn private credit apparatus fuelling Wall Street’s lending boom to the packaging up of subprime mortgages that preceded the 2008 financial crisis, due to the “layers of people in between the source of the money and the use of the money”.

Privately owned First Brands’ eschewed the more public bond market in favour of borrowing money through so-called leveraged loans. It also raised billions of dollars through even more opaque financing backed by its invoices and inventory, which was often provided through private credit funds.

“With the advent of private credit . . . institutions [are] putting money into this magical machine that gives you equity rates of return for senior debt exposure,” he said, adding that these high yields for seemingly safe investments “should be the first red flag”.

The FT has previously reported that some private credit fund managers had estimated returns in excess of 50 per cent on First Brands’ supposedly secured inventory debt.

Even many of the most sophisticated credit specialists on Wall Street were until recently unaware of the existence of the US auto parts maker’s special purpose entities (SPEs) backing its inventory financing.

Traders at Goldman Sachs told clients hours before these financing vehicles separately filed for bankruptcy last week that they just had discovered indications of high-cost borrowing from these entities that were “hard to reconcile”.

Chanos said: “We rarely get to see how the sausage is made.”

First Brands’ bankruptcy has revealed that James controlled both the auto parts conglomerate and some of its off-balance sheet SPEs through the same chain of limited liability corporations. Chanos described this common ownership as a “huge red flag”.

His short thesis against Enron was fuelled in part by the realisation that executives at the group were managing SPEs that engaged in complex transactions outside the purview of its corporate balance sheet.

In contrast to Enron, First Brands’ financial statements were not publicly available. While hundreds of managers of so-called collateralised loan obligations had access to its financial disclosure, they had to consent to non-disclosure agreements to receive the documents.

“The opaqueness is part of the process,” Chanos said. “That’s a feature not a bug.”

In the fifth year of its Re.Uniqlo initiative, the company focuses on materials, collection, retail and design in a 360-degree strategy.

Uniqlo’s circular initiative “Re.Uniqlo,” operated by Fast Retailing, Japan’s largest fashion company, is marking its fifth year. What began as a concept has evolved into a core business strategy, driven by Koji Yanai, group executive officer overseeing sustainability, and creative director Clare Waight Keller, who frames her mission as “designing the lifespan of clothing.”

Across the fashion industry, circular strategies are multiplying — global SPAs are strengthening garment collection schemes, while European luxury houses are elevating biodiversity as a strategic pillar. Uniqlo’s approach stands out by pairing donation-led cultural sensitivity with advanced recycling technologies developed in collaboration with Toray, and by linking corporate management directly with design.

Launched in 2020, Re.Uniqlo has expanded its scope from clothing collections to commercializing recycled down products, offering repair and remake services and resale pilots. This five-year phase has been about trial and error across the board, moving circularity from philosophy to practice.

Fast Retailing has pledged to shift 50 percent of all materials used to recycled or more sustainable alternatives by 2030. As of 2024, the ratio stood at 18.2 percent. Responsible sourcing guidelines now require traceability from the very top of the supply chain, starting with farms and mills. From 2023, this began with cotton products; cashmere followed in 2024, with wool added in 2025. Audits are now being rolled out across all stages, from raw material origin to garment manufacturing. Additionally, a proprietary Life Cycle Assessment framework requires suppliers to input environmental-impact data, which is verified by third parties. The numbers are visualized to inform sourcing criteria and investment decisions — essentially “pre-compliance” with Europe’s tightening CSRD and eco-design regulations.

On the production side, monitoring based on the 2004 Code of Conduct and employee hotlines reinforces human rights and labor protections. On the consumer side, the Re.Uniqlo Studio concept has expanded to 63 stores across 22 markets, fostering a “longer wear” culture through repair and embroidery. Within this framework, donations are positioned as a community contribution, while resale is seen as a social responsibility toward a circular society. Resale pilots are being tested in a shop-in-shop format to identify conditions for wider rollout.

Koji Yanai’s View: “Anchored in Customer Expectations”

Spearheading the strategy is Yanai, who defines the mission behind Re.Uniqlo in simple but universal terms: meeting customer expectations. From his travels to stores worldwide, he hears directly from customers whose criteria for “good clothing” now extend beyond quality, price and design to include safety and responsibility in production.

That, he said, is both a challenge and a constructive pressure. “Today, customers hold more information than we do. Even with eco-friendly products, if there is a price gap, the final decision rests with them.”

The trend toward spending only on what’s truly necessary has grown stronger post-pandemic, a trend now shared globally. Also, Yanai believes differences in sustainability awareness between Japan and the markets of Europe and the U.S. are narrowing.

In today’s hyper-connected world, where technologies and trends spread instantly, fashion tastes cross borders as seamlessly as soccer, music or film. Yanai also views the tightening of European regulations positively, sometimes as an opportunity for past efforts to be reassessed. “If consumers demand transparency as a right, and it becomes a rule, then we will compete in accordance with those rules,” he affirmed.

He does not hide his frustration that Uniqlo is still sometimes categorized as “fast fashion.” He stressed, “Our clothes are made to last for years.” He cited the credibility of hearing directly from consumers who say, “I’ve been wearing this for five years.” To him, communication must not stop at intention: “It’s not enough to assume we’ve conveyed it. We have to persist until the message truly lands,” he said.

Clare Waight Keller’s View: “Designing With Longevity in Mind”

For Clare Waight Keller, design is both the entry and exit point of circularity. “My role is to think carefully about the lifespan of clothing,” she said. The goal: timeless appeal, high quality and functionality delivered together.

One example is the men’s sweatsuit launched in September 2023 under “Uniqlo :C.” A basic wardrobe item, it became a top seller within six months thanks to its contemporary silhouette and double-layered premium cotton. Repeat purchases followed, which Keller described as “a real answer to sustainable design that blends universality and quality.”

Her most significant challenge is evolving Uniqlo’s classics. A French striped T-shirt has been updated with a modern touch, featuring an improved length and neckline. Even core products like Heattech are being elevated, with innovations such as lightweight cashmere blends. By continuing to use consistent fabrics and palettes across seasons, she advocates for “wardrobe longevity.” Recycling is important, she emphasized, but it is not enough. “Sustainability is only genuine if the garment is made to last.”

Keller acknowledged that collection volumes remain low and sees the need to strengthen consumer engagement. Still, she imagines inspiration from the future moment when her own designs return through collection bins. “That would spark new ideas for reuse,” she said with a smile.

The cadence of her work has shifted dramatically from seven annual collections at luxury houses to just two at Uniqlo. She calls it “a luxury” to spend time scrutinizing fabrics and proportions before release. Her vision: carefully built timeless wardrobes, and ultimately, “a system where more and more of our clothes return to circulation, creating wardrobes that endure five, 10 years and beyond.”

The Strategic Agenda for the Next Decade

One pressing challenge is accelerating the switch to recycled materials. As noted, progress toward the 2030 50 percent target sat at just 18.2 percent in 2024. While polyester already achieves a 47.4 percent recycled input, natural fibers remain a bottleneck. Resale is still at the pilot stage.

Looking ahead, biodiversity will be critical. Uniqlo has begun collaborating with scientists at the University of the Ryukyus to assess the impact of cashmere herding in Mongolia. Using satellite imagery to analyze rainfall and desertification, and tracking rare species, the company aims to incorporate scientific insight on ecological risks alongside climate considerations.

The bigger question is how to maximize resources from the collected garments. Here, Uniqlo has already achieved one breakthrough: its down recycling scheme with Toray. At the heart of this is the separation machine at Toray’s Seta plant, which uses weight differentials and air flow to extract feathers even from garments with zippers and fasteners attached. The recovery rate is already at about 90 percent, with further improvements underway. Such technical foundations are what make circularity not just a philosophy, but a business.

Globally, governments and corporations are racing to build “fiber-to-fiber” recycling systems through innovation and regulation. With annual revenues topping 3 trillion yen, Uniqlo is positioning itself to lead its supply chain toward scalable solutions. Success would have ripple effects across the entire industry.

Notably, Uniqlo’s clothing collection began with donations, a practice that continues today. By August 2024, 58.97 million items had been donated to 81 countries and regions via UNHCR and other partners. Sorting centers follow strict cultural guidelines, filtering out prints that may evoke conflict, ensuring clothes can be handed over directly. Building on this foundation, Uniqlo is now looking beyond donations — advancing fiber-to-fiber technologies and scaling up resale — to address evolving consumer expectations.

Ahead of the brand's spring 2026 show on Sunday in Paris, the designer discussed his first year at Valentino, addressing the challenges of modern fashion, criticism, and his vision for the brand's future, further exploring couture.

ROME – It’s hard to believe it’s been only a year since Alessandro Michele’s first fashion show as creative director of Valentino. The changes within the company and outside in the industry — and not only — have been unfolding at breakneck speed.

The debuts of an unprecedented number of designers at brands from Dior to Chanel and Versace have been swirling around Michele and the house of Valentino is now being led by a new chief executive officer, Riccardo Bellini, who succeeded Jacopo Venturini in August.

As Kering and Valentino restructure, the current ownership of the couture house, controlled by Mayhoola, will not change before 2028 at the earliest — an amendment to their shareholders’ agreement, inked at the time of Kering’s acquisition of a stake in Valentino in 2023. Kering has also welcomed a new CEO, Luca de Meo, as François-Henri Pinault passes the torch to the Italian executive maintaining the role of chairman, and Francesca Bellettini has succeeded Stefano Cantino as CEO of Gucci, the brand Michele exited in 2022, now designed by Demna.

Michele is aware of the pressure placed on him to help boost Valentino’s business, which reported 2024 revenues of 1.31 billion euros, a 3 percent dip compared with 2023. During a candid interview at Valentino’s storied headquarters near the Spanish Steps, the designer acknowledged the demands of the market, the comments on his work so far, the haters — digital and not — and explained how he keeps all the white noise at bay to focus on fashion, his passion of a lifetime.

Rumors about his potential exit have been swirling for some time and, during an exclusive interview, Michele attributed this to the fact that “people like to gossip. Fashion has become pop, but the bar of the conversation has been tragically lowered.”

Turnarounds and financial expectations must be met in one season, and he compared the ongoing chatter to that surrounding actors and their love lives.

“It’s not easy to do our job in such a moment because everything is so incredibly fast around us. Financials have accelerated everything. Of course, fashion was never disconnected from business but now the economics are 10 times more important, and results must be immediate and astonishing,” said Michele. He admitted that given his track record at Gucci, “when you are linked to a record economic achievement, life is more complicated and the same success is expected of you.”

Being “centered” helps to focus on his own life as well as his profession. “It’s important to try and perform with authenticity and sincerity through this slalom of outside factors that no doubt exist, but I am a professional and I learned the hard way to find balance. For a younger designer it’s more complicated, there are many demands, and it’s all become very complex. A creative director is now involved in so many different aspects compared to the past.”

In the late Renaissance building on Piazza Mignanelli near the Spanish Steps, Valentino’s storied headquarters, exquisitely decorated and frescoed, Michele has added his own unmistakable touch to his office, which is a reductive term, given the expansive space — more of a salon — with huge windows looking down on the square.

Michele, his long black hair braided under a baseball cap, wearing denim pants and a cream T-shirt with Miranda July written on the front and one of his beloved cameo necklaces, is a self-confessed “collector of objects, a hoarder,” and personalized the room with a giant Labubu — a gift, he said — 19th century chinoiserie pieces, beautiful Neo-classic Capodimonte sculptures and a large painting by Bernardo Siciliano, “an allegory of adolescence and summer idleness.” A supersized Le Chat de la Maison stands by the window — a whimsical touch that reflects Michele’s attitude. “This is my playroom,” he said with a smile.

His personal life, his partner and friends, his books and collections help him to be “grounded,” but his passion for fashion is what drives him. “We chose one another many years ago, but I exist as an individual, as a person and I understand and contextualize the scene around me, which is tempestuous.”

He addressed how the persona that filters through social media, which is “a propeller of different fantasies,” is different from his real self. He views social media as “returning to an antique kind of information, made of legends, mythological tales and oral transmission by a single person that did not have a title. You are a journalist and your duty as a professional is important, to write as a historian, based on ethics and experience. Now, anyone can write whatever they want.”

Asked about those critics who have negatively compared his designs to those of Valentino Garavani, Michele shrugged. “I love them anyways, my job is public and people who have an opinion should express it, it’s a form of freedom, which is primary in this historical moment. What I feel that is missing is the respect that is necessary in a conversation; we have become dangerously aggressive, arrogant and overbearing. I would like for the language to become less denigratory and for the world to return to being gentle. There can be a healthy dialogue even with different points of view, but grace and kindness are lost.”

Michele said he would be “inept” if he simply “copied what has been done in the past” by Garavani. “My job is to mediate and I challenge myself.” Aware that staging his last fashion show in a public bathroom “is a metaphor that someone did not appreciate,” he defended his choice. “It’s still poetry,” he said, praising the 2023 film “Perfect Days” directed by Wim Wenders and highlighting Tokyo’s public toilets. “I find the tale of intimacy very interesting — as when we find ourselves all decked out in the bathroom of the Met Gala, for example.”

At Gucci, Michele embraced cinematography, codirecting a series of films with Gus Van Sant, and this “need to build tales and not only show clothes” continues to inform his vision. “I have a theatrical soul and it’s a language that in some cases is disturbing in the established fashion language. Those who came before me did an extraordinary job, each with their own idea of beauty but I feel I should be allowed to build a bridge for the brand onto the future and this takes time.”

While continuining to live in Rome, his hometown, Michele said he very much likes Paris, where the brand will once again show the spring 2026 collection at the Institut du Monde Arabe (Arab World Institute) on Sunday. “Paris is Rome’s pretty granddaughter, there’s always been such interesting cross-pollination between the two cities,” he said.

While mum on details about the collection, he said he felt “the need to investigate a topic very dear to the founder — beauty — through a recovery operation. Even though I have been accused throughout my career of opposing beauty, I think beauty is like a big embrace, recognizing diversity, never rejecting, and I would like to examine the meaning of beauty in depth, in the current times. I adore working here, maintaining the poetry and beauty that surrounds me here as a value and point of reference, a sort of romanticism filtered through my eyes.”

Addressing the critics who contend he has been “Guccifying” Valentino with his own distinctive style, Michele said there was something to say about consistency, praising Giorgio Armani’s a few days after the designer’s death. “In a world where we need to change at all costs, remaining consistent is a sign of modernity,” he said. He praised Armani’s “dedication and tenacity,” his professional “longevity” and how he “decided on his own all his life and he never stopped believing in what he was doing.”

Asked if he ever thought of launching his own brand, Michele said he sees himself as “part of a theater company. There is my name on the billboard but I work for that show, I bring my know-how, and my own point of view, which can help see things in a different light. I’m like a frontman of a band, but I never thought of being a soloist, I would miss the band. I grew up professionally as part of very big brands, and I like it this way. I like to work with the team, I’m old school, I come here, start early and leave late and often I continue to work from home where I created a studio.”

On a desk lay Michele’s Nellcôte bag, one of the designer’s most recent and successful designs. The brand has been upping the ante on the accessories category, and Michele once again said “it takes time to build [the segment]. Maria Grazia [Chiuri] and Pierpaolo [Piccioli] did an extraordinary job with the Rockstuds. We all came from the Fendi school.” He confessed an “obsession” for bags, which he collects “from all different brands.”

Asked if he is thinking of expanding the brand’s product range, he was cautious. “Valentino has a different nature and vocation from Gucci, which was more about branding, but jewelry is something I think that would have a home here.”

The designer sees couture as the foundation and fil rouge of the brand. Aware of “the great and precious opportunity” he’s been offered with couture, his aim is to further “experiment” with it, as he acquaints himself with the processes and the clients.

“The atelier, the skills and the virtuosity of the seamstresses are extraordinary. When you come into contact with the atelier, you fall into a spell, it’s an incredible experience, building a dress, a dream around a body. It’s as if it were an atemporal, mythological and magic space where every stitch is applied by hand — there is not one sewing machine. This is a world and an asset that comes from the past and that must be preserved and protected.”

Michele paid tribute to Venturini but was also upbeat about the new chapter of the company under the lead of Bellini and de Meo. “I started my path with Jacopo and I have so much respect for him, he’s been very important in my career and he wanted me here. So much has been written about him without knowing the facts,” he said.

He praised Bellini’s “preparation and great sensibility, he listens and it’s important to have an open exchange. It all seems very positive.”

Likewise, he said he had “a good feeling” about de Meo, “who has great energy. I’m happy because we [designers] are like Father Christmas’ little helpers, and people like Riccardo and Luca are passionate about their job and this helps us deliver dreams. I am always positive about change, it can be a source of inspiration. We are in a moment when we should change, go in a different direction. It’s a world that you see is collapsing, all that worked before does not work anymore, and we must find a new balance. I don’t write history and I am not an economist, but we can write poetry and there is so much need for it.”

Work is evaporating, businesses are closing, longtime residents are leaving, and the city’s creative middle class is hanging on by a thread

LOS ANGELES—Brian Mainolfi has been drawing since he came to this city in 1994. The Baltimore native started as an assistant to legendary Looney Tunes animator Chuck Jones, worked on Disney’s “The Hunchback of Notre Dame” and “Mulan,” and spent a decade on the animated sitcom “American Dad.”

The appeal of the work was simple. “People love cartoons,” he said. “And I love making cartoons.”

Since his last show was canceled in 2024, Mainolfi’s artistic output has been limited to dinosaurs and monsters in his sketchbook. Like thousands of people who work in the entertainment industry, he has become collateral damage of a precipitous slowdown in production. The only work he’s found is teaching an animation class at a Cal State campus three hours away, for $350 a week.

Mainolfi’s family of four never lived extravagantly on his salary of around $100,000, but now they’re using retirement and college savings and scrimping to survive in their three-bedroom ranch house in suburban Burbank. With his union healthcare set to disappear at the end of the year for lack of work, the 54-year-old is trying to figure out for the first time in his life what he could do to make money besides draw.

“By the end of the year if I don’t have something, I’m going to have to apply to a big-box store or a grocery store or something,” he said.

Los Angeles is full of transplants who moved here to pursue dreams of working in movies and TV. Few earned millions as stars or A-list directors. They build the sets, operate the cameras, manage the schedules and make sure everything looks and sounds perfect. The work isn’t steady, because film shoots end and TV shows get canceled. But established professionals had rarely gone more than a few months between gigs—until now.

The entertainment industry is in a downward spiral that began when the dual strikes by actors and writers ended in 2023. Work is evaporating, businesses are closing, longtime residents are leaving, and the heart of L.A.’s creative middle class is hanging on by a thread.

“This is the first year since 1989 that I haven’t had a show to work on,” said Pixie Wespiser, a 62-year-old production manager and producer who has worked on 36 TV series, including the original “Night Court” and its recent revival. “I look around and I see so many people who are seriously suffering.”

At the end of 2024, some 100,000 people were employed in the motion picture industry in Los Angeles County, according to the Bureau of Labor Statistics. Two years earlier, there were 142,000.

The primary reason is that Hollywood is making less stuff. The film business has yet to rebound from the shutdown of theaters during the pandemic. TV production was booming in the 2010s and early 2020s as companies tried to jump-start streaming services, but in 2022, investors saw streaming growth was slowing and decided what actually matters is profitability. Entertainment companies, which plan productions many months in advance, cut spending dramatically when the strikes ended the following year.

Nearly 30% fewer movies and TV shows with budgets of at least $40 million began shooting in the U.S. in 2024 than in 2022, according to data firm ProdPro. The first three-quarters of this year were down another 13%.

The situation is particularly dire in Los Angeles. Because of the region’s high costs and a state production tax credit that, until recently, lagged behind what competitors like Georgia and British Columbia were offering, studios make most of their content far from their corporate offices. Last year, there was less production activity in the Los Angeles area than at any time since at least 1995, save for the pandemic, according to the nonprofit group FilmLA.

The industry’s slump is contributing to L.A.’s broader economic challenges. The region’s recent employment growth has been anemic compared with other major metropolitan areas and the nation overall. Its 5.7% unemployment rate is higher than California’s 5.5% and the nation’s 4.3%. And L.A. is still struggling to recover from the winter’s devastating fires in Altadena and the Pacific Palisades, where many entertainment workers lived. That disaster exacerbated the city’s already severe housing crunch.

Hollywood has endured downturns before, but rarely this sudden and severe. Some industry analysts believe consumers might be pivoting permanently from professionally made content to the endless buffet of YouTube and social media.

Any rebound in production activity would take at least a few years, and possibly many more. And a full recovery might never happen if generative artificial intelligence makes animation and visual-effects jobs obsolete, as many workers fear.

Meanwhile, thousands of dreams built around working in the movie and TV business are evaporating.

Missing purpose

Thomas Curley won an Oscar recording the sound on 2014’s “Whiplash” and had more job offers than he knew what to do with as recently as 2022. The 49-year-old hasn’t worked since April of last year, save for one week on a movie that was made in Europe but needed to shoot exteriors in San Francisco.

The hardest part isn’t watching his savings wither while he does home improvement projects and hunts for jobs, Curley said. It’s missing the creative camaraderie he has enjoyed for most of his adult life on movie and TV sets.

“Feeling like you’re part of a team that’s making something that can provide joy for millions of people around the world is what drew me here in the first place,” said the native of upstate New York. “That level of purpose is a really hard thing to let go of.”

Entertainment industry workers got through last year with a mantra: “Survive ‘til 25.” But jobs are even more scarce this year. L.A. and New York-based members of the health and pension fund that covers most behind-the-scenes craftspeople worked 18% fewer hours this year through mid-August than in the year-earlier period.

“It felt like the floor fell out,” television writer Matt Walsh said of the evaporation of job prospects. After moving to L.A. from Orange County, he spent a decade hustling as an assistant on sets and in writers’ rooms before finally getting his first scriptwriting assignment in 2023, on the TBS series “Miracle Workers.”

Since the strikes ended, the 34-year-old hasn’t been able to find work as a writer. He’s back to working as a production assistant, the first job he ever had in entertainment.

Hollywood’s downturn has rippled through the region’s economy. Fewer productions mean fewer orders for props, costumes and catering from local businesses, and less spending by unemployed or anxious workers on everything.

Courtney Cowan’s Milk Jar Cookies shop made deliveries to movie sets and agents’ offices, but most of its business was regular people. She was expecting 2023 to be a banner year with the opening of her second location and a franchise program. Instead, the strikes began and sales immediately dropped 30%.

Cowan stopped drawing a salary, laid off some workers and tapped personal savings to keep paying the rest. She was thrilled when the strikes ended that November, but it turned out to be the worst holiday season in her business’s 10-year history. Milk Jar got only one order from an entertainment company, compared with dozens in prior years.

Milk Jar shut its doors in January 2024 and Cowan declared personal bankruptcy. After 11 months of unemployment, she found work as a buyer at the culinary supply shop where Milk Jar used to buy equipment.

“It’s not dramatic to say that the result has been personal financial ruin,” she said while wiping away tears on a sunny Los Angeles morning.

Federal assistance?

At a former furniture showroom in August, something unusual was happening: A movie was shooting in Los Angeles. On the set of “The Last Firefighter,” camera operators set up tracks for dolly shots while technicians used flickering red lights to suggest far-off flames. Few among the cast and crew could remember the last time they had worked on a set and gone to sleep in their own bed.

Shooting the low-budget film in L.A. costs at least one-third more than doing it overseas, according to its financiers. But producer Steven Paul said he wants to prove a point: “If we’re going to say we want to bring production back to America, I can’t be the one filming everywhere in the world.”

Paul’s longtime collaborator Jon Voight, whom President Trump named a “special ambassador” to Hollywood, called earlier this year for the federal government to implement a tax credit for all movies and TV shows produced in the U.S. The Motion Picture Association of America, which represents the major studios and streamers, and the industry’s leading unions signed on to the proposal. Backers say a federal tax credit of at least 15%, when combined with state tax ones, would make the U.S. competitive with most foreign jurisdictions.

“We’ve looked at the numbers, and you will reach and exceed the capacity of all our major production hubs if there’s a good federal incentive,” said Scott Karol, who runs several of Paul’s companies.

Trump hasn’t taken a stance on tax incentives, but he said in a social-media post on Monday that filmmaking “has been stolen from the United States of America, by other Countries, just like stealing ‘candy from a baby.’” In April and again this week, he said he would impose a 100% tariff on movies shot overseas. It isn’t clear how such a tariff would work given that movies aren’t physical products imported into the U.S.

California Gov. Gavin Newsom signed a law this year to more than double the state’s film and TV tax credit to $750 million annually, after a coalition of unions and studios urged legislators to salvage what’s left of the industry here. But producers say it is unlikely to attract big productions to the state because it doesn’t apply to “above the line” costs such as star salaries, and recipients of the limited funding are chosen through a competitive application process.

Georgia has no such restrictions and until recently was luring many productions from L.A. Now that state, too, is suffering as rising costs across the U.S. have led studios to make nearly all big budget movies and event series overseas. The “Fantastic Four” saved New York City in a film shot outside London. “KPop Demon Hunters” was animated in Canada. The newest frontier is Eastern Europe, where Amazon’s “The Terminal List: Dark Wolf” is taking advantage of inexpensive crews and scenic locales in Hungary and Croatia.

People still come to L.A. with dreams of making it in Hollywood. Getting started is easier than ever. Filmmaking tools are cheap and online distribution is free. Elite YouTube creators sometimes employ up to 100 or more production workers in L.A.

But those jobs typically pay less than union work for Netflix or Warner Bros., and there aren’t nearly enough of them to make up for the lost movie and TV production jobs.

As a result, some entertainment workers are leaving Los Angeles. The county’s population has dropped by nearly a quarter million since 2020.

After starting as a production assistant on “Dead Poets Society,” Susan Hellman became an assistant director—the person who keeps everything running on chaotic sets. Her work on shows like “Entourage” allowed her to buy a house in the beach neighborhood of Venice and a horse she rode in her limited time off.

But when the strikes ended, she couldn’t find another job. Isolated, depressed and blowing through her savings, she sold her house for $1.7 million and used the profit to pay cash for a home in Ocala, Fla.

The 60-year-old finds early retirement with her horse to be boring compared with her old life with her “TV family.” L.A. acquaintances still reach out to ask if she knows of any available jobs. “It’s like, guess you didn’t hear, but I was forced to sell my house and leave town,” she said.

Animator Rachel Long worked steadily for more than a decade on shows like “BoJack Horseman.” When her last series ended in 2024, she found herself competing with hundreds of other experienced artists for a handful of available jobs. And with AI starting to make impressive videos, she was losing confidence in the future of her profession.

So the 39-year-old retrained to be a phlebotomist, figuring it was the easiest alternate way to make a decent living. She jokes with patients and co-workers that she “went from drawing blood to drawing blood,” but struggles to stay positive now that she makes about one-third of her prior $120,000 salary for work that is less fulfilling.

“I hope we can get back to some semblance of how it used to be, so I can work with my friends and collaborators doing something creative that others can enjoy,” she said. “But I have to face the really real fact that it might not happen.”

Some European officials worry lifting sanctions would bolster Russian retaliation against western companies

The EU is preparing to lift sanctions on assets linked to Russian oligarch Oleg Deripaska in order to compensate Austria’s Raiffeisen Bank International for damages it had to pay in Russia, according to European officials.

Provisions to unfreeze shares worth about €2bn in Strabag, an Austrian construction company once part-owned by Deripaska, are included in the latest draft of the EU’s Russia sanction proposal, according to seven people familiar with the matter.

The assets would fall to Raiffeisen and compensate the bank for a €2bn fine it had to pay following a Russian court ruling in favour of a business linked to Deripaska, the officials said.

The sanctions were originally imposed because of Deripaska allegedly providing material support to “Russia’s military and industrial complex” in the full-scale invasion of Ukraine.

However, some European officials worry the move would legitimise oligarchs’ efforts to circumvent the EU’s sanctions against Russia, and bolster Russian courts that are retaliating against the sanctions by ordering the confiscation of western assets.

Ambassadors of several EU member states are expected to object to the move, which was initially proposed by Austria, at a meeting on Friday to discuss the new sanctions package, five of the officials added.

Raiffeisen is the western bank with the largest remaining presence in Russia following President Vladimir Putin’s full-scale invasion in 2022. But it has come under pressure from regulators and foreign governments to leave Russia like many other western businesses have done.

RBI has been trying to wind down operations in Russia. But Russian regulators are unwilling to let Raiffeisen leave because it is one of the country’s few remaining access points to the Swift international interbank payment system, according to people familiar with the matter.

A potential sale would probably lead to western sanctions against the bank and its owner, cutting it off from global markets.

The Austrian bank and Deripaska previously tried, and failed, to arrange a complex asset swap to unfreeze Deripaska’s 24 per cent stake in Strabag, held through his company Rasperia.

The deal ultimately fell apart over concerns that it would circumvent EU sanctions. The EU and the US later sanctioned another oligarch, Dmitry Beloglazov, and several entities that were involved. Deripaska had sold Rasperia, including the frozen Strabag shares, to Beloglazov.

Rasperia has since taken Raiffeisen to court in Russia, where the Austrian lender was forced to pay €2bn in damages. The court also ordered the transfer of the Strabag shares to Raiffeisen.

Raiffeisen said in January that the verdict had “no binding effect in Austria and the transfer of shares is therefore not enforceable”. It also noted that “Rasperia’s STRABAG SE shares are subject to an asset freeze under EU sanctions which also currently prevents their transfer.”

The proposal under discussion in Brussels would now allow Raiffeisen to take ownership of the sanctioned shares, in effect enforcing the Russian court’s decision.

Officials argue that this legitimises Russian courts clawing back sanctioned assets through confiscation, and could encourage other oligarchs to pursue the same approach.

“It may set a convenient precedent for Russian entities to indirectly recover their frozen funds through the confiscation of the assets of subsidiaries of EU companies still operating in Russia,” one diplomat said.

Another said that this would “pay for Raiffeisen’s own risk [taking]” by deciding to continue operating in Russia.

Proponents of the measure argue that it would prevent the sanctioned entity from receiving its money twice — via the court-ordered compensation, and when the assets are unfrozen once sanctions are lifted.

Raiffeisen declined to comment. The Austrian foreign ministry did not respond to a request for comment.

A spokesperson for Deripaska did not respond to a request for comment. Rasperia did not respond to a request for comment.

The rapid building of excess capacity both extends bubbles and ultimately bursts them

The AI “bubble” looks to be approaching its endgame. The dramatic rise in AI capital expenditure by so-called hyperscalers of the technology and the stock concentration in US equities are classic peak bubble signals. But history shows that a bust triggered by this over-investment may hold the key to the positive long-run potential of AI.

AI stocks have exhibited bubble characteristics for a while. Share prices have skyrocketed, driving excessive index concentration. AI companies are doing deals between themselves, helping inflate their valuations. And they are buying each other’s products and using vendor financing to sustain growth.

Until recently, the missing ingredient was the rapid build-out of physical capital. This is now firmly in place, echoing the capex boom seen in the late-1990s bubble in telecommunications, media and technology stocks. That scaling of the internet and mobile telephony was central to sustaining “blue sky” earnings expectations and extreme valuations, but it also led to the TMT bust.

This followed the similar patterns from the introduction of nearly all general-purpose technologies — from railways, electricity, radio, semiconductors, to the internet. These bubbles didn’t end because the dream about the new technologies fell short; rather, the bubbles burst either due to regulation, increased competition, or the buyers of the products being unwilling, or unable, to sustain the demand. While the technology theme may be structural, all too often the end users are cyclical, putting the returns on investment in this excess capacity at risk from weakness in end-user cash flow.

Today’s AI hyperscalers are seeing these vulnerabilities emerge. Europe is leading the way on regulation, with the European AI Act. Competing models Deep Seek from China and K2 from the United Arab Emirates use less computing power. More importantly, tech cash-flows are beginning to be squeezed. If the end buyers of AI suffer an exogenous cash flow shock, the merry-go-round will slow rapidly as sales collapse faster than capex can be reined in, resulting in faltering earnings and accelerated cash burn. Tech buybacks would also likely be cut, undermining both share prices and market valuations.

So the message for today’s investors is “buyer beware”. The TMT bust shows why. Today we are living the digital dream envisioned in the TMT bubble: a hyperconnected world, with seamless digital communication and where the internet of things is a reality. Yet this did not stop today’s digital winners from the TMT era falling heavily in the tech bust — Microsoft (65 per cent), Apple (80 per cent), Oracle (88 per cent), and Amazon (94 per cent). These companies took 16, five, 14 and seven years respectively to regain their 2000 peaks.

My perspective on technology bubbles has been shaped by five themes that emerged from William Janeway’s book Doing Capitalism in the Innovation Economy. First, periods of bubble behaviour — and especially excess capex — are central to the adoption of new technologies. The hype around them drives down the cost of capital, allowing the rapid build-out of the new technology.

Second, when the bubble bursts, the excess capacity does not just disappear. It can be acquired at low prices by new players. The waste in the creative destruction identified by economist Joseph Schumpeter is inherent to bubbles, giving access to the new technology capacity at a lower price than if the boom persisted. This cheap capacity helps embed the technology in society.

Third, late equity investors funding this excess capex are likely to lose a big slice of their investment. You need to have been invested in hyperscalers since 2019-2020 to survive a 70 to 80 per cent bust without a portfolio loss.

Finally, tech busts have more negative economic impact when this capex is funded by debt rather than equity. Given this AI capex is largely equity funded, the fallout may be more similar to the TMT bust. Policy should respond to any bust using the 1987 or 1998 playbooks, rather than zero rates and quantitative easing after the Great Financial Crisis.

The good news is that the aggressive AI capex build-out almost guarantees AI’s future ubiquity. The bad news is that this will probably only come after a period of Schumpeterian creative destruction. So, despite our positive view on the structural narrative for AI, investors should be wary of paying for AI stocks on valuations equivalent to 30 times earnings, or 8 times sales. Unless of course, they want to altruistically fund this rapid AI capacity build-out as their way of contributing to society’s longer-term gain.

Down-to-the wire team negotiations capped a long dance between Trump and CEO Bourla

Pfizer reached a deal with the Trump administration to avoid tariffs and address drug pricing, leading to a 14% surge in its shares.

The agreement includes most-favored-nation pricing for Medicaid and discounted drugs on a new direct-to-consumer platform, TrumpRx.

Other pharmaceutical CEOs expressed anger and felt blindsided by Pfizer’s deal, which was negotiated individually with the administration.

Over a weekend in late September, the team of Pfizer PFE -0.48%decrease; red down pointing triangle officials working with the Trump administration on drug prices got a message: Clear your schedules.

Negotiations were reaching a tipping point. CEO Albert Bourla and Chris Klomp, head of Medicare, who was leading negotiations for the administration, had met in Washington and reached a handshake agreement on the contours of a drug price deal. A deadline to avoid tariffs was looming, and there were still a few things to iron out.

All the major pharmaceutical companies had been told they needed to come up with a plan to lower prices and manufacture in the U.S., or face consequences including tariffs. Pfizer wanted to make sure that if the company agreed to a deal, it would secure a reprieve on levies and its manufacturing investments could focus on younger and future products rather than infrastructure for drugs about to go generic, according to people familiar with the matter.

Talks intensified in the week of Sept. 20. The final deal came together in the wee hours of the morning before a deadline President Trump had set for imposing tariffs. It was signed by Bourla and Health Secretary Robert F. Kennedy Jr. just ahead of the announcement on Tuesday, according to people familiar with the deal.

What was revealed that day in the Oval Office, as Bourla stood near Trump, Kennedy and others while giving each other smiling glances, was a win for both parties. Trump got to announce a deal cutting drug prices and a start on a new direct-to-consumer platform dubbed TrumpRx. And Pfizer avoided tariffs with a strategy that would be a minimal hit to its bottom line.

The deal was built not just on the team negotiations, but on the longstanding relationship between Bourla and Trump, cultivated over dinners at Mar-a-Lago and regular catch-ups over the phone between the president and chief executive. Bourla recently suggested that Trump’s Operation Warp Speed, which was launched to quickly develop Covid-19 vaccines, was the kind of accomplishment that “would typically be worthy of the Nobel Peace Prize.” At Tuesday’s announcement, Bourla thanked Trump for his friendship and hugged Centers for Medicare and Medicaid Services Administrator Mehmet Oz.

It was a moment of triumph for Bourla that has brought on ire from other executives. During a 90-minute call on Wednesday with executive members of PhRMA, the trade group representing the pharmaceutical industry, some other CEOs were angry and felt blindsided, according to people familiar with the meeting. Genentech’s CEO Ashley Magargee discussed whether Bourla should be removed as chair, one person said.

A Genentech spokesman declined to comment.

Bourla pushed back, telling the executives that Trump made clear he wanted better pricing for the American public and that the deal showed how companies could avert tariff threats and have certainty to invest in their businesses.

“We are in constant dialogue with the U.S. government and have been working with the administration on a number of issues where we share the president’s commitment to addressing devastating disease and making medicines more affordable,” a Pfizer spokesman said.

White House officials said the goal was to preserve innovation while also getting lower drug prices for Americans.

The deal has lifted beleaguered drug stocks by pointing a way for companies to remove the threat of tariffs and deal with U.S. pricing pressures. Shares of Pfizer have surged 14% since the deal was announced. Shares of other big drugmakers including Eli Lilly and AstraZeneca also have risen sharply, on the expectation that other companies might strike similar deals that spare them more onerous outcomes.

Trump’s goal of reshaping how drugs are priced in the U.S. started in his first presidential term, but it wasn’t until his second term that he gained momentum. His proposals for pharmaceutical tariffs and a May executive order calling for “most favored nation” pricing—whereby the U.S. government pays the same as the lowest prices for drugs that other wealthy countries pay—eventually brought pharmaceutical companies to the negotiating table like never before.

Several drugmakers, including Eli Lilly and Johnson & Johnson, announced plans to spend tens of billions of dollars on U.S. manufacturing and research in the coming years as a show of cooperation. Pfizer took a different approach—waiting to secure a deal before committing to spending billions of dollars more in the U.S.

Drugmakers opposed most-favored-nation pricing, arguing that it would deprive them of funding needed to develop future medicines and that it could jeopardize the billions in the recently announced planned investments. At the time, some industry leaders didn’t put much stock in an executive order signed by Trump because it seemed the government didn’t have the authority to impose the terms. And details from the administration were sparse.

Still, the most-favored-nation proposal kicked off a series of meetings between administration officials and drugmakers, including Pfizer, to hash out the details. Health Secretary Kennedy and CMS Administrator Oz delegated the negotiations to a small team led by Klomp.

The initial meetings were cordial, but they hadn’t yet dug into substantive issues, and Pfizer had made no commitments, Bourla told an investor conference in June.

That month, Pfizer held several meetings with CMS officials, according to people familiar with the matter. The company’s takeaway: The Trump administration wanted to negotiate with companies individually, rather than with a powerful trade group like PhRMA. That meant Pfizer and other companies wouldn’t be able to discuss their talks with each other to avoid antitrust violations.

Some companies started to take small steps toward fulfilling some of the goals outlined by Trump. In July, Pfizer and Bristol-Myers Squibb, which co-market the widely used blood thinner Eliquis, announced they would sell the drug at a discounted cash price through a direct online purchasing service.

But Pfizer and other drugmakers weren’t budging on broader price cuts. By summer, there was little progress in the negotiations. “We stalled,” Oz said at a White House press conference Tuesday.

Trump turned up the pressure. In late July he sent letters to the CEOs of 17 drugmakers, including Pfizer, demanding action within two months. He outlined four main goals, including extending most-favored-nation pricing to Medicaid and to newly launched drugs. He demanded that drugmakers return increased revenue from abroad if higher prices could be negotiated in other countries, and that companies participate in direct-to-patient sales of high-volume drugs at lower prices.

The letters were notable because they didn’t propose applying MFN prices across the board to include commercial insurance or Medicare. This was more limited in scope than what had seemed to be on the table in May.

In the letter to Pfizer, Trump crossed out “Dr. Bourla” in the salutation and wrote “Albert” with a marker, a sign of their familiarity. He did the same for his letter to Eli Lilly CEO David Ricks.

The letter “asks a lot of us,” Bourla told analysts on an earnings call in early August. He said he was having active discussions with Trump, Kennedy and Oz about the letter.

“You know that the president is impatient, so he wants the results quickly,” Bourla said.

The week before Trump’s Sept. 29 deadline, he posted that he would implement 100% tariffs on pharmaceuticals on Oct. 1, but that companies that were actively building new U.S. manufacturing capacity would be exempt.

The threat of tariffs motivated behaviors and “clearly motivated ours,” Bourla said at the White House press conference announcing the deal.

On the morning of the day the deal was announced, Bourla called Steve Ubl, the head of PhRMA, to notify him, according to people familiar with the matter.

Pfizer agreed to provide most-favored-nation pricing for its drugs to the federal and state Medicaid program for lower-income people. The prices would be tied to prices charged in several other wealthy countries. Pfizer also said it would launch future drugs at prices that are equal to those in other wealthy countries. And it would offer some discounted drugs on the new TrumpRx direct-to-consumer site launching in 2026.

“I was honored to have Albert be the first,” Trump said at the press conference. “He’s done a fantastic job with the Covid. Pfizer is right at the top.” Trump said more deals with other drugmakers would follow.

In exchange, Pfizer got a commitment that its drugs manufactured overseas wouldn’t face tariffs for three years.

The deal might not put the industry completely in the clear. But for now, the price cuts don’t apply to patients with Medicare and commercial insurance, which makes up most of Pfizer’s U.S. business. Medicaid is less than 5% of Pfizer’s U.S. revenue, said Leerink Partners analyst David Risinger. And the most-favored-nation prices that will be applied to Medicaid might not be much lower than discounts Pfizer and other drugmakers already provide to Medicaid.

The discounts Pfizer provides in the direct-purchasing platform also aren’t likely to dent its sales, analysts said. They’ll likely be in line with discounts that Pfizer already provides to health insurers and employers. And most insured patients will have lower out-of-pocket costs by getting the drugs through their insurance rather than the direct-purchasing service.

“It will be for a really tiny fraction of the market,” said Sean Sullivan, a professor at the University of Washington School of Pharmacy who researches drug pricing.