DHUnplugged Podcast

Andrew had the flu. Markets had their own fever. Earnings ahead. Credit cracking. Have yields peaked? Oil’s shipping bill explodes. Gold standard chatter returns. Be nice to your AI. It may bite back. PLUS we are now on Spotify and Amazon Music/Podcasts! Click HERE for Show Notes and Links DHUnplugged is now streaming live - with listener chat. Click on link on the right sidebar. Love the Show? Then how about a Donation? Follow John S. Dvorak on X Follow Andrew Horowitz on X Warm-Up - INFLUENZA! - Earnings Season Ahead - Are we going back to the gold standard? - Be Nice to Your AI - They May Bite Back....(OR COOK YOUR BUILDING) Markets - Yields may have just peaked... - Oil prices may not be the end of the problem - Cracks in credit - Bank earnings - lots of profits to show DHU MAILING LIST! - Go to DHUnplugged.com Cracks in Credit/Real Estate - 2 Charts Price Reductions Sellers and Buyers HERE WE GO: BE NICE TO CLAUDE - Anthropic prohibits sustained, needless cruelty toward its models; ordinary frustration, pushback and testing are exempt. - Claude ending abusive conversations remains the main response; account restrictions or suspensions remain possible. - The policy also removes blanket restrictions on personalized political targeting while retaining bans on deception and voter suppression. TANKER MAYHEM - US-to-China tanker hire: about $80 million, versus $74 million for a Falcon 9 launch. - One US booking reached $41 per barrel in freight, versus $4.50 last year. - Hormuz shuttle transfers, damaged ships and Africa detours are tying up the fleet. - Inflation-adjusted tanker rates are the highest since the 1960s, squeezing refinery margins and raising delivered oil costs. FRANCE SHAKES THE EURO - France's borrowing premium over Germany reached its highest since the eurozone debt crisis; the euro hit a 17-month low. - Heavy government spending and political obstacles to fiscal repair are pushing investors toward safer German and Swiss assets. - Pressure extends into French stocks and corporate credit, while high energy costs add to Europe's economic strain. - FIGS - Starting to ware on Italy and Greece too.... (Used to be PIIGS) SOFTWARE MOATS - MEET THE SHOVEL - REA lets AI agents inspect apps and binaries without source code, understand features and help build comparable versions. - Potential threat to proprietary software pricing: functionality that took years to develop becomes cheaper to reproduce. - SaaS still has data, integrations and switching costs; the software itself may become less defensible. - Not a universal software copier; whether markets have priced in this threat remains an open question. JAPAN - CYBER EMERGENCY - Japan issued an emergency cyber warning after widespread attacks on major businesses; Times Car's breach affected 6.6 million accounts. - AI can lower the cost and skill needed for attacks and help foreign hackers overcome Japanese language barriers. - AI involvement in this particular wave remains unconfirmed; exposed personal information includes identification and payment details. FRANCE - HACKERS COOK THE GROCERIES (FAV STORY) - Hackers hijacked supermarket refrigeration controls, heating units to 122 degrees Fahrenheit; Intermarche initially reported around 150 stores hit. - Multiple chains suffered spoiled food and reported fires; affected inventory had to be discarded. - Danfoss said affected refrigeration controllers ran outdated firmware; a shared equipment vulnerability exposed multiple retailers. - No ransom demand or claim of responsibility had surfaced in the latest report. JUNK FLASHING YELLOW - High-yield yields climbed to 8.1%, from 7.22% a month earlier. - Overall spreads reached 315 basis points; CCC-and-below spreads approached 1,250. - BB-rated bonds represent over 60% of the market, versus 38% before the financial crisis. - The warning to watch: widening spreads spreading from weak borrowers into stronger businesses. CONSUMER DEBT CRACKS - Nearly 20% of families reported being behind on loan payments, up from about 12% in the prior Fed survey. - Buy-now-pay-later usage increased from 7% to 12%; median debt payments consumed 15.4% of income. - Some 8.6% of families spent over 40% of income on debt payments, the highest share since 2013. - Median real income rose 7%, but median wealth gained only 2%; these are three-year survey comparisons. TRADE GAP WIDENS - The monthly US trade deficit widened 13.7% to $105.6 billion, versus $102 billion expected and a revised $92.8 billion previously. - The goods deficit reached $136.6 billion, offset partly by a $31 billion services surplus; imports grew faster than exports. - The gap is the widest since the pre-tariff import surge and can weigh on GDP; imports alone do not establish weak domestic demand. - So much for leveling the playing field - clearly still cheaper to buy goods that are NON US and NO incentive for outher countries to by US BESSENT'S NEW ADVISER - Judy Shelton joins Treasury as counselor, advising Scott Bessent on currencies and China's financial conditions. - Trump's unsuccessful former Fed nominee has advocated a gold standard and questioned traditional Fed independence. - The appointment gives her a Treasury advisory role without a vote on Fed interest-rate decisions. - WHY NOW? GOLD STANDARD AGAIN? ANOTHER BESSENT BLUNDER - Citi expects Bessent to cut long-bond auction sizes and possibly eliminate 20-year sales; its base case is $3 billion less per auction for both 20- and 30-year bonds, replaced with Treasury bills. Cancellation is not confirmed. - The aim would be to reduce long-term borrowing costs, but BNP Paribas warns scrapping the 20-year could look like panic, hurt liquidity and push yields higher. CHINA'S BANK CLEANUP - China closed 670 lenders last year through mergers and dissolutions aimed at creating larger, better-capitalized institutions. - Rural-bank bad loans reached 2.8%, versus 1.5% industrywide; thin capital and weak governance remain concerns. - Closures include consolidation into other lenders; the count does not represent hundreds of simultaneous bank failures. EARNINGS OPTIMISM RECORD - Among 116 S&P 500 companies issuing quarterly EPS guidance, 72 guided above consensus and 44 below. - Technology supplied 44 positive outlooks, led by software and semiconductors; projected tech earnings growth is 65%. - Positive guidance hit a tracking record; the 62% share applies to guidance issuers, not the entire S&P 500. EARNINGS TAKE CENTER STAGE - Tuesday: JPMorgan (JPM), Goldman Sachs (GS), Citigroup (C) and Wells Fargo (WFC); watch loan demand, credit losses, deposit costs and trading revenue. - Wednesday: Bank of America (BAC), Morgan Stanley (MS) and ASML (ASML); bank outlooks meet a key test of semiconductor equipment orders. - Thursday: Taiwan Semiconductor (TSM); focus on AI demand, margins, capital spending and guidance after its record quarterly revenue. - Banks must show whether higher rates are helping profits or hurting borrowers; chipmakers must show whether massive AI spending keeps translating into orders. GOLDMAN'S BONUS JACKPOT - About 20 executives are positioned to receive equity awards exceeding $500 million; Solomon's share tops $100 million. - Waldron and several business heads also benefit from five years in which Goldman outperformed most rivals. - Previously granted performance awards are reaching payout; this is not a new $500 million annual cash-bonus pool. TIGER'S PAPER BILLIONS - Tiger Global could book a $5 billion paper profit as OpenAI discusses raising $30 billion at a $1.4 trillion valuation. - Tiger initially invested $150 million at a $15.7 billion valuation before ChatGPT launched. - It added to the position later; the projected profit is not solely on that original investment. - The financing remains under discussion and gains unrealized; Tiger's hedge and crossover funds gained 9.4% and 19.3%. BROADCOM FINANCES ITS CUSTOMER - Broadcom agreed to provide Anthropic up to $42 billion in financing. - That covers roughly one-third of a $125.2 billion, five-year TPU computing lease commitment. - Anthropic is expected to become Broadcom's largest chip-design customer next year; financing can convert into equity. - Anthropic disclosed potential conflicts; certain defaults could accelerate lease payments while restricting financing access. ANDURIL BUILDS BIG - SUBS - Anduril plans a $3.7 billion, two-million-square-foot Maryland shipyard for Virginia-class submarine components and assemblies. - More than 3,100 permanent jobs are targeted as the Navy supply chain struggles to deliver two submarines annually. - Gecko Robotics will supply robotics, AI software and automated quality assurance; the expansion is still planned. APPLE WANTS YOUR HOUSE - Apple reportedly helped LG develop a video doorbell, thermostat, deadbolt lock, temperature sensor and indoor, outdoor and floodlight cameras. - LG will build and brand the accessories, expanding Apple's ecosystem without Apple producing and supporting every device itself. - Several devices support Matter and Thread; the lock adds ultra-wideband for proximity-based unlocking, putting the lineup against Ring, Nest and SmartThings. - LG filings confirm the hardware but do not name Apple; its development role is reported, and accessories remain months away. AI PRICES YOUR BIG MAC - McDonald's AI recommends store-level prices using millions of transactions across roughly 14,000 US restaurants. - Demand and competitor prices feed recommendations; franchisees retain authority, but some describe pressure to follow them. - Headquarters tracks deviations, nearby stores can charge different prices, and McDonald's warns franchisees about antitrust risks.       Love the Show? Then how about a Donation? THE CLOSEST TO THE PIN for SpaceX (SPCX) Winners will be getting great stuff like the new "OFFICIAL" DHUnplugged Shirt!   FED AND CRYPTO LIMERICKS   See this week’s stock picks HERE Follow John S. Dvorak on Twitter Follow Andrew Horowitz on Twitter

Maybe people are just unhappy – says Goldman. Counterfactualzzzz – that is why bonds are still up. Are we getting $5,000? Bitcoin is running again. PLUS we are now on Spotify and Amazon Music/Podcasts! Click HERE for Show Notes and Links DHUnplugged is now streaming live - with listener chat. Click on link on the right sidebar. Love the Show? Then how about a Donation? Follow John S. Dvorak on X Follow Andrew Horowitz on X Warm-Up - Greenland (Renamed Red White and Blue Land?) - Consumers and People are JUST UNHAPPY - No more press coverage? Maybe people are unhappy (see above) because of all of the shenanigans going on. ---- Maybe we will all be happier without all of the White House coverage Markets - New Highs - NASDAQ 100 moving up with risk assets. (Breath poor though) --- Close enough to end of month, quarter to be window dressing ---- Buy Yom Kippur!!! - 10YR Treasury at 5% again - wait until you hear Bessent's victory speech DHU MAILING LIST! - Go to DHUnplugged.com MARKET MOVE - On the heels of SoftBank Group Corp. seeking the equivalent of more than $11 billion in a junk bond deal to fund investments in ChatGPT creator OpenAI. - The company is looking to issue $10 billion of dollar securities and €1 billion of euro debt to fund a follow-on investment in OpenAI expected to close next month. - SoftBank and its lead banks are sounding out investors on potential pricing for the proposed junk bond offering, with yields that would be records for SoftBank in those specific currencies and tenors if priced at those levels. - Could it be that simple why NAZ 100 is at new highs? BESSENT'S "COUNTERFACTUAL" DEFENSE - This is darling... - Rep. Jim Himes questioned Bessent on September 15 at a House Financial Services Committee hearing. - Himes: "The 10-year went up by 20 basis points. How can you say it was successful?" - Bessent: "Well, there is a counterfactual of what would it have done." - Bessent added: "We then proceeded to have the two most successful Treasury auctions that we've had in 20 years." - Goes into the Alternative Facts and Fake News Category. BESSENT'S MYSTERY BANK - Treasury Secretary Scott Bessent said a large unnamed bank would be sanctioned over Iran. - The administration has targeted Iranian oil, shipping, finance and weapons networks. - "Operation Economic Outcast" had already targeted nearly 60 entities, people and vessels. - Treasury later sanctioned Russia's VTB Bank over alleged Iran-related sanctions evasion. GOLDMAN: MAYBE CONSUMERS ARE JUST UNHAPPY - Michigan consumer sentiment fell nearly 8% from August and 13% year over year. - Goldman says weak sentiment may increasingly reflect broader unhappiness, not just economic conditions. - "Very happy" Americans fell to 23% in 2024 from 31% in 2016. - Inflation still weighs on confidence, but distrust and pessimism may also be distorting surveys. - Goldman says sentiment may be becoming less useful for predicting actual activity. GREENLAND DEAL - Trump announced a deal expanding the U.S. security role in Greenland while it remains Danish territory. ---So it seems we are not going to "take it" - The agreement aims to settle the dispute over greater U.S. strategic control. - Rubio said the U.S. has greater financial and military capacity to defend Greenland. - Arctic security, Russia, China and critical minerals remain the core issues. - See Greenland Energy (GLND), Greenland Mines (GRML) and Critical Metals (CRML) SMART GLASSES MEET THE REGULATORS - Paris prosecutors opened an investigation into alleged secret filming using camera-equipped smart glasses. - Meta-EssilorLuxottica glasses hold roughly 76% of the global market. - About 7 million units were sold last year. - French regulators are getting workplace complaints and questions over whether the devices can be banned. - Australia and some UK cinemas are also moving toward restrictions. EUROPE LOSES SAUDI BARRELS - Saudi Aramco told European customers they will receive no crude allocations next month. - The cutoff follows an attack on the East-West pipeline. - European refiners are scrambling for replacement barrels, lifting North Sea premiums. - Saudi Arabia is working to restore pipeline capacity and reroute supply. - Oil still fell for a third straight session Friday. BUFFETT LEAVES THE CHAIR - Warren Buffett, 96, stepped down as Berkshire chairman and became chairman emeritus. - Howard Buffett becomes non-executive chairman; Greg Abel is already CEO. - Berkshire is worth roughly $1.1 trillion. - Cash stood at $364.7 billion at the end of June. - Shares barely moved, suggesting investors saw the transition as expected. WHITE HOUSE MEDIA BAN - Trump said CNN, MS NOW and Politico would be banned from the White House. - He cited what he called persistent false reporting. - The move raises First Amendment and press-access issues. - It escalates an already long-running fight with major media outlets. CREAM CHEESE INNOVATION CYCLE - Kraft Heinz launched Mike's Hot Honey, salted caramel and cranberry orange Philadelphia flavors. - Mike's Hot Honey launches at Walmart first. - Philadelphia plans about 10 new varieties over the next two years. - Brand investment is up 63% versus 2025. - Spending on new flavors has quadrupled. MICROSOFT WRITES RULES FOR THE MACHINES - Microsoft published a draft AI code focused on keeping humans in control. - Systems must accept correction and shutdown. - The rules bar help with weapons and other dangerous areas. - Microsoft also says AI should not claim consciousness, personhood or legal rights. - Mustafa Suleyman called it a "constitution" for future models. CHATGPT INVENTS WITNESSES - A New Mexico lawyer filed a murder appeal containing fabricated witnesses and police testimony. - The material was generated with ChatGPT. - The state Supreme Court fined attorney Stephen Aarons $5,000. - The court cited "false testimony from wholly fabricated witnesses." - Aarons said he expected ChatGPT to produce a "bulletproof summary." RICH PEOPLE NEWS BENTLEY'S $300K ELECTRIC SUV - Bentley is preparing its first fully electric SUV, expected around $250,000-$300,000. - The Torcal is scheduled to debut September 23. - Bentley isn't using traditional fake engine noise. - Instead, its EV soundtrack reportedly uses drums, bass guitar and viola. - Expected range is more than 300 miles with ultra-fast charging. MIAMI AIRPORT GETS A $5,000 "SUPER LOUNGE" - LET THEM EAT CAKE - PS opened a private terminal at Miami International Airport this summer. - It operates from the restored former Pan Am headquarters. - The Salon starts at about $1,295 per person. - A private suite runs about $4,950 for up to four travelers. - Guests get private TSA screening, customs, luxury lounges and direct tarmac transfers to the aircraft. - The private suites include marble bathrooms, balconies and private lounge space. - It is essentially private-jet treatment while still flying commercially.   Love the Show? Then how about a Donation? THE CLOSEST TO THE PIN for SpaceX (SPCX) Winners will be getting great stuff like the new "OFFICIAL" DHUnplugged Shirt!   FED AND CRYPTO LIMERICKS   See this week’s stock picks HERE Follow John S. Dvorak on Twitter Follow Andrew Horowitz on Twitter