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

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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

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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.

 

 

 

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Howie Mandel Negotiations with Iran….Deal or No Deal?

Robot Soldiers – new and exciting.

30-Year Bond Mayhem and gullible markets.

So much economic news coming up – let’s dig in.

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Warm-Up

-  Closest to The Pin???????????

- Howie Mandel Negotiations with Iran....Deal or No Deal?

- Robot Soldiers - new and exciting

Markets

- 30-Year Bond Mayhem!  Alliteration or Tautogram?

- This week in Economics - plenty to come

- What is wrong with Nike?

- How gullible can markets be?

 

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GAME: IS IT AN ALLITERATION OR TAUTOGRAM

----- Alliteration: The repetition of the same initial sound in neighboring words (for example, "big bad bears").

-------Tautogram: A strict form of alliteration where all words in a phrase or sentence begin with the identical letter

- Which is it? :::  Bessent's Big Bond Blunder Backfired!

How about this?  Brash Billionaire Bessent’s Botched Big Bond Blunder Backfired Bitterly!

THIS WEEK IN ECONOMIC NEWS...............

TUESDAY - THE CONSUMER AND JOB OPENINGS

- Consumer confidence and August job openings arrive at 10 AM ET.

- Watch whether households are getting more worried about prices and whether employers are still hiring.

WEDNESDAY - INFLATION AND SPENDING

- August PCE inflation, personal income and spending arrive at 8:30 AM ET, alongside updated second-quarter GDP figures.

- The key question: is spending holding up while inflation stays elevated?

THURSDAY - FACTORY CHECK

- September ISM manufacturing arrives at 10 AM ET. Watch new orders, employment and prices paid for signs that growth and inflation are pulling in different directions.

FRIDAY - THE BIG ONE

- September payrolls, unemployment and wages arrive at 8:30 AM ET.

- The current forecast is about 100,000 jobs and 4.1% unemployment, down from August's 162,000 job gain.

FAST FOOD'S SQUEEZE

- McDonald's CEO expects elevated inflation and flat restaurant traffic to persist. US same-store sales rose just 0.8% last quarter as visits fell.

- McDonald's plans $8.5 billion in support for restaurant upgrades through 2036, betting better operations and value offers can win back customers.

-- Wendy's faces its own traffic problem and plans to close up to roughly 350 underperforming US restaurants in 2026.

-- Meritage Hospitality Group, a franchisee operating 314 Wendy's locations, filed for bankruptcy protection on September 17. Wendy's itself did not file.

- The common problem: customers are visiting less often while food, labor and restaurant costs remain high.

- La Vie on Saturday ($36 Mezza Plate!)

MCD CHART

AMERICA.GOV

- AI for all Americans!

- Did you see the images?

CHINA'S AI LABS BORROW CLAUDE

- Anthropic accused several Chinese AI labs of extracting Claude's capabilities to train competing models.

- Alibaba allegedly generated more than 151 million Claude exchanges.

- Moonshot generated more than 23 million; DeepSeek more than 12 million.

- Some customer prompts were allegedly routed through Claude without users knowing.

- Anthropic tightened verification and account controls in response.

$5,000 MIDTERM PROMISE

- Trump promised $5,000 to every adult U.S. citizen if Republicans retain Congress.

- A universal payment would cost well above $1 trillion.

- He told voters to "pretend that I'm on the ballot."

- No detailed funding mechanism or legislative structure was presented.

ROBOT SOLDIERS

- Chinese military researchers are studying humanoid robots for battlefield use.

- Possible roles include reconnaissance, logistics, infiltration and urban combat.

- One study modeled six robots clearing a building alongside human troops.

- China produced about 95% of global humanoid shipments in 2025.

- No evidence shows armed humanoids are operational with PLA units yet.

NIKE LOST INDEX STATUS

- Nike is being removed from the S&P 100 after 18 years.

- Its market value has fallen roughly 80% from five years ago.

- Nike shares are around $36, making it the smallest-weighted stock in the price-weighted Dow at about 0.4%.

- Reuters noted that its Dow membership could now be at risk as well.

- Nike shares have gained only about 5% since joining the Dow in 2013.

NKE CHART

ON (ONON) SIGNS MBAPPE

- Kylian Mbappe ended a roughly 20-year relationship with Nike and signed with On.

- The deal reportedly includes both cash and equity.

- On is using Mbappe to make a serious move into soccer after building credibility in tennis with Roger Federer.

- Former French star Thierry Henry is heading On's soccer business.

- ONON shares are still down roughly 40% this year amid slowing growth in the Americas.

IRAN'S SEVEN-DAY OFFER

- Iran proposed reopening the Strait of Hormuz within seven days of a deal, with a pause in regional fighting.

- In return, it wants the US blockade on Iranian ports lifted, frozen funds released and oil sanctions waived.

- The Wall Street Journal reported that Trump rejected the plan; Reuters could not confirm that report. Iran was still awaiting an official US response.

- An Iranian official said Tehran would not give ground on uranium enrichment, even if the peace proposal were accepted.

- Seems like all bets are off- Trump goes All Howie Mandel: DEAL OR NO DEAL (NO DEAL!)

THE LONG BOND BREAKS HIGHER

- The 30-year Treasury yield reached its highest level since 2004 during Thursday's bond selloff.

- Elevated energy prices, inflation concerns and heavier government borrowing added pressure to long-dated bonds.

- Higher Treasury yields raise the financing hurdle for mortgages, commercial property and the AI buildout.

GOLDMAN WAITS OUT THE AI DEBT FLOOD

- Goldman Sachs Asset Management is underweight bonds from major AI hyperscalers.

- Its concern is supply: more borrowing for data centers could push bond prices down and yields up.

- Goldman still believes in the AI business case. The underweight call is about the price of its debt.

- Moody's puts hyperscalers' off-balance-sheet obligations at nearly $3 trillion.

PIMCO'S PHILADELPHIA OFFICE HIT

- Pimco faces an estimated $35 million loss on a commercial mortgage-backed security tied to two downtown Philadelphia office towers.

- The expected loss is roughly 70% on that security.

- A sharp loss on one office-backed bond puts the value of similar collateral back in focus as borrowing costs rise.

- - Starting to see some strain in the commercial market now that rates are

META'S MUSE TAKES OFF

- Meta's personal AI agent Muse exceeded 2.5 million downloads and topped US app charts within two weeks of launch.

- Meta shares jumped 11% on September 21, adding nearly $200 billion in market value.

- Muse can send emails, shop and book travel on a user's behalf.

- Meta is also testing a feature in which human contractors handle some calls made through Muse. Employees raised privacy concerns; Meta says it will disclose the feature before a public rollout.

 

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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!

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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

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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.

 

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It’s the end of the world and we know it…

CPI numbers – HOT – Markets think hit a top – or just options Friday?

Sell Rosh Hashana and Buy Yom Kippur?

Plenty of AI

PLUS we are now on Spotify and Amazon Music/Podcasts!

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Warm-Up

- Follow Up - I am the House! - 10YR shot above 5% on Monday

- Follow Up 2 - Straight of Hormuz - NO Boats passing (can we please stick to the facts?)

- CPI numbers - HOT - Markets think hit a top

- Let's talk end of the works - Cyberdyne IRL

Markets

- 100% Probability of a rate hike this week

- Sell Rosh Hashana, Buy Yom Kippur

- HACK ETF - Cybersecurity name up 49% YTD

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FED HIKE IS BACK

- Fed meets Tuesday-Wednesday, with a 25 bp hike to 3.75%-4.00% now the dominant expectation.

- 85% of economists surveyed expect a hike; futures moved to roughly 90% odds after the latest inflation data.

- August CPI rose 0.4% month-over-month and 3.4% year-over-year; core rose 0.3% for the month and 2.4% annually.

- Markets are increasingly pricing additional tightening beyond September rather than this being a one-and-done move.

AND -> THE 5% TREASURY IS BACK

- The 10-year Treasury yield briefly crossed 5% Monday for the first time since 2023.

- Higher oil prices, hotter inflation, heavy bond supply and expectations for more Fed tightening are all pushing yields higher.

- The move raises the hurdle rate for stocks while feeding directly into mortgages, corporate borrowing and other credit.

- Bonds are becoming meaningful competition for equities again at a time when stock valuations remain elevated.

SLOW DOWN THE AI

- Anthropic CEO Dario Amodei called for deliberately slowing frontier-model advancement to create more time for safety controls.

- Sam Altman and Elon Musk publicly backed the push for more caution; Microsoft separately released a draft AI code requiring models to remain under human control.

- Microsoft says its models must accept shutdowns and corrections and should not be designed around claims of consciousness or legal rights.

- The semiconductor index dropped more than 5% Monday; Nvidia, Broadcom, Micron and AMD were among the major casualties.

DEEPSEEK CHANGES THE MEMORY MATH

- DeepSeek's latest architecture sharply lowers the amount of memory required to run inference, including a major reduction in KV-cache requirements.

- This is not simply HBM being replaced by SSD: the architecture reduces both high-speed memory and persistent-storage requirements per inference.

- That complicates the straight-line thesis that every incremental AI token requires proportionally more HBM and storage.

- Micron, Samsung and SK Hynix still benefit from enormous AI memory demand, but will efficiency gains become an important counterweight to unlimited-demand forecasts?

V4V - What is it and how can you participate?

TOKENS - A Quick Tutorial

ORACLE SAYS THE AI SPENDING IS REAL

- Oracle booked more than $30 billion of new AI cloud contracts during the quarter, taking total backlog to $664 billion.

- Revenue rose 30% to $19.3 billion and adjusted EPS came in at $1.92 versus $1.74 expected.

- Oracle spent $28.5 billion on capex, but about $11.36 billion was offset by customer prepayments.

- Most new AI orders use prepayments, customer-owned hardware or similar arrangements, reducing the amount Oracle itself must finance.

AI STOCKS MEET THEIR FIRST REAL NARRATIVE PROBLEM

- The Philadelphia semiconductor index dropped roughly 5.4% Monday even though it remains up about 58% for the year.

- Nvidia fell roughly 2.6%; Broadcom, Micron and AMD were each down around 4% during the session.

- The new concern is not whether AI works, but whether safety restrictions could slow the pace of model releases and infrastructure spending.

- Software names including Adobe, ServiceNow and Workday initially benefited as investors reconsidered how quickly AI might disrupt incumbent software.

CHATGPT INVENTS THE WITNESSES

- A New Mexico defense lawyer was fined $5,000 and held in contempt after submitting fabricated police testimony and nonexistent witnesses generated by ChatGPT.

- The attorney had used ChatGPT to summarize trial proceedings and failed to verify the output before filing it with the court.

- The appeal was reassigned to a public defender and the attorney was referred for further disciplinary review.

- This goes beyond fake case citations: the system generated supposed factual evidence and attributed it to witnesses who did not exist.

HUMANOID ROBOTS: FROM IPO MANIA TO THE BATTLEFIELD

- China is researching humanoid robots for reconnaissance, logistics, hazardous missions and potentially urban combat.

- Separately, Chinese regulators are tightening scrutiny of humanoid-robot IPOs after extreme volatility surrounding Unitree Robotics.

- Unitree shares reportedly fell roughly 45% after initially increasing fivefold following its listing.

- Hyundai-owned Boston Dynamics also said a 2027 IPO is unlikely; Hyundai wants production capacity of roughly 30,000 robots annually by 2028.

CHINA GETS ACCUSED OF INDUSTRIAL-SCALE AI COPYING

- U.S. officials accused six Chinese AI companies, including DeepSeek, Moonshot and Alibaba, of using U.S. models for large-scale distillation.

- Distillation trains smaller models using outputs from more powerful models, dramatically reducing development cost and time.

- U.S. officials said the activity targeted technology from Anthropic, OpenAI, Google and SpaceX.

- China rejected the allegations and argued that distillation is a normal industry technique also used by American companies.

OIL BACK ABOVE $100

- Brent traded around $107 Monday and WTI around $103 after fresh attacks on Saudi infrastructure and Middle East shipping.

- Saudi Arabia's East-West pipeline was temporarily disabled, threatening a route capable of carrying roughly 4% of global crude supply.

- Gulf states postponed planned talks with Iran over the Strait of Hormuz as regional tensions widened.

- Physical crude prices are becoming highly location-dependent: barrels with secure export routes command major premiums while trapped grades trade at steep discounts.

COPPER GOES VERTICAL

- Copper has recently traded near record territory around $14,500-$14,700 per metric ton.

- Tight mine supply is colliding with demand from electric grids, data centers, renewable power and other electrification projects.

- Tariff uncertainty has also distorted flows as traders move available metal toward markets offering the highest prices.

- Copper's surge makes proposed mining combinations such as Anglo American-Teck increasingly valuable; that roughly $54 billion deal is still awaiting Chinese regulatory approval.

THE BIG MYSTERY BANK SANCTION

- Treasury Secretary Scott Bessent said the U.S. would sanction a large bank as part of increased financial pressure on Iran.

- He initially declined to identify the bank or its country.

- The campaign has already targeted oil, shipping, finance, aviation, weapons procurement and digital-asset channels connected to Iran.

- The market question is whether secondary sanctions begin touching larger banks or companies outside Iran that facilitate trade.

APPLE'S $1,999 FOLDING BET

- Apple launched the iPhone Duo, its first folding iPhone, priced at $1,999.

- It opens to a 7.6-inch display and represents one of Apple's biggest changes to the iPhone form factor in years.

- The launch puts Apple directly into a market dominated by Samsung and Huawei and could help push foldables beyond their current niche.

- It is also arriving during a severe memory-and-storage chip shortage that has already forced higher pricing elsewhere in Apple's product lineup.

PRIVATE CREDIT REDEMPTION PRESSURE EASES

- Investors in BlackRock's $23.1 billion HPS Corporate Lending Fund requested withdrawals equal to about 11.5% of shares, down from 13.3% the prior quarter - BUT, is this just a rounding error?

- The fund will repurchase only 5%, the normal quarterly limit, leaving some redemption requests unfilled.

- Other BlackRock private-credit vehicles also showed lower withdrawal requests during the quarter.

- Private-credit investors have been worried about lending standards and heavy exposure to software companies potentially disrupted by AI.

DID WE DISCUSS >>> THE $50 BILLION DATA-CENTER IPO

- SB Energy is reportedly seeking a valuation above $50 billion despite having no operational data centers.

- It reported about $139 million of first-half revenue against a $3.21 billion net loss.

- The company claims roughly $439 billion of project backlog.

- OpenAI is an investor, warrant holder and major future customer; Nvidia is also providing capital while supplying the chips.

- Soooooo...... No operating data centers, billions in losses and a possible $50 billion valuation. At least they remembered to build the valuation first.

 

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Warm-Up

- I am the House! Bessent tonight on Yen and other matters (he has inside information)

- Straight of Hormuz - There is no movement people

- CPI coming Friday - many say ultimate Fed test

- Gen-Z Dumps the bubbles

Markets

- Chips up, making up for some time

- Oil UP! and UP!

- Yields keep climbing

DHU MAILING LIST! - Go to DHUnplugged.com

BOND YIELDS KEEP CLIMBING

- Japan now has a 3% 10-year yield while carrying government debt above 200% of GDP.

- Higher Japanese yields also create an incentive for domestic investors to bring money home rather than reaching overseas for returns.

- The broader bond selloff is hitting the U.S., Germany, U.K. and Japan at the same time.

FED HIKE ODDS RISE

- Warsh said the Fed still has “work to do” if officials are not confident inflation is returning to 2%.

- Fed Governor Christopher Waller has left open the possibility of holding rates steady if inflation cools.

- The September decision is increasingly being dictated by incoming inflation data and oil.

-  It is kinda funny.... The “data-dependent Fed” is now apparently oil-dependent, jobs-dependent and whatever-CPI-says-next-week-dependent.

OIL KEEPS PRESSURE ON INFLATION

- Renewed U.S.-Iran tensions have pushed oil higher and revived fears about supply through the Strait of Hormuz.

- The Strait remains one of the most important chokepoints for global energy flows.

- Oil is working directly against central banks trying to bring inflation back toward target.

-  Basically, central banks can raise rates all they want yet it is too bad that the the Strait of Hormuz does not attend FOMC meetings.

SCHWAB VOLATILITY TRADE

- Barron's argues low market volatility may not last as fall seasonality and macro risks build.

- Schwab could benefit if volatility drives heavier customer trading activity.

- The suggested trade used an October risk reversal built around $110 puts and $120 calls.

BEAR INVASION

- Colorado has logged more than 7,000 bear sightings this year, already a record.

- Drought and poor natural food supplies are pushing bears into homes and businesses.

- New Mexico and Utah have also reported unusually high numbers of bears being euthanized.

- One Colorado homeowner found two bears inside his hallway; another wandered into a vape shop.

- Is this a warning for markets?????

META SETTLEMENT

- Meta agreed to pay up to $18 billion over 10 years to settle state claims involving harm to children.

- States had been seeking penalties approaching $200 billion.

- Teen accounts will face time limits, overnight restrictions and muted school-hour notifications.

- Meta did not have to eliminate personalized recommendations or targeted advertising.

BROADCOM: NEXT AI CHECK

- Broadcom reports Wednesday after the close, another major test of AI spending after Nvidia.

- Focus will be on AI semiconductor growth, hyperscaler demand and the outlook for custom AI accelerators.

- Broadcom's guidance matters beyond the stock because it offers a read on whether huge data-center spending plans are still accelerating.

WEIRD ONE: SHEIN'S UPSIDE-DOWN IPO

- Shein is looking to raise about $1.8 billion in its Hong Kong IPO while paying roughly $3.6 billion in cash and stock to early investors.

- The payouts stem from investor protections triggered after Shein's valuation collapsed from about $98 billion in 2022 to roughly $26.8 billion.

- Some of the same early investors receiving compensation are coming back as cornerstone buyers in the IPO.

- Essentially: raise $1.8 billion from new investors while sending twice that amount back to older ones.

GOOD GOOD GOES BAD

- Good Good Golf's controversial Callaway ad showed co-founder Garrett Clark shoving a female creator in a movie spoof, triggering immediate backlash.

- Callaway ended its partnership, Dick's and Golf Galaxy pulled Good Good merchandise, and Golf Channel canceled the current "Big Break x Good Good" season.

- Good Good also stepped away as title sponsor of the PGA Tour's November event in Austin.

- WOW - the company had more than 2 million YouTube followers and become one of golf's fastest-growing media and merchandise businesses before the blowup.

ARGENTINA BEEF PRICE FIX

- Trump expanded lower-tariff beef imports by 300,000 metric tons in an effort to bring down record-high U.S. beef prices.

- The U.S. cattle herd is at its lowest level in 75 years, while USDA expects beef production to fall roughly 4% this year.

- Argentina is one source of additional supply, but U.S. ranchers argue cheaper imports could undercut domestic producers just as they are trying to rebuild herds.

- Trump says imported beef could help lower prices; farm-state lawmakers and ranch groups say the short-term consumer fix could make the long-term supply problem worse.

EUROPE GETS GROWTH AND INFLATION

- Euro-zone manufacturing is expanding at its fastest pace in more than four years as headline inflation moves back above 3%.

- Stronger factories give the ECB more room to tighten without immediately crushing economic activity.

- Much of the new inflation pressure is energy-driven, which higher ECB rates cannot directly fix.

- Europe finally gets better manufacturing numbers, so naturally the reward is another rate hike.

CHINA’S TWO-SPEED ECONOMY

- The private manufacturing PMI showed expansion while the official factory reading remained in contraction.

- Export orders strengthened, but services and domestic demand remain weak.

- The divergence shows the improvement remains concentrated in exporters.

- Alternative Facts: Depending on which PMI you prefer, China’s factory sector is either expanding or contracting. Two economies for the price of one.

THE $50 BILLION DATA-CENTER IPO

- SB Energy is reportedly seeking a valuation above $50 billion despite having no operational data centers.

- It reported about $139 million of first-half revenue against a $3.21 billion net loss.

- The company claims roughly $439 billion of project backlog.

- OpenAI is an investor, warrant holder and major future customer; Nvidia is also providing capital while supplying the chips.

- Soooooo...... No operating data centers, billions in losses and a possible $50 billion valuation. At least they remembered to build the valuation first.

NVIDIA BUYS HUGGING FACE FOR $13 BILLION

- Nvidia agreed to buy Hugging Face for about $12.9 billion.

- Hugging Face was valued at $4.5 billion in 2023 and has about $150 million in annual revenue.

- Nvidia will pay roughly $11.9 billion to shareholders plus $1 billion in employee retention equity.

- Hugging Face will remain open and interoperable.

- JC Called this earlier last week. Obviusly the pressure was on since his scoop and they needed to get this done.

UNCLE SAM'S STOCK PORTFOLIO

- Federal equity positions now include Intel, MP Materials and Trilogy Metals.

- Intel, MP Materials and Trilogy Metals all jumped after their respective government deals.

- An Intel shareholder lawsuit argues the CHIPS Act did not authorize the government to demand an equity stake.

- The case could affect other government investments made using CHIPS Act funding.

GEN Z DUMPS THE BUBBLES

- Non-carbonated drinks accounted for 38% of new premixed-alcohol launches last year, up from 27% in 2021.

- Boston Beer’s Sun Cruiser is growing while Truly slows.

- Mom Water is on pace to exceed 1 million cases this year.

- Lucky One Lemonade sold 1 million cases in its first seven months.

- Gen Z has apparently decided carbonation was the problem.

TRUMP WANTS LOWER RATES

- President Trump called for lower interest rates after the August jobs report.

- Markets moved the other way, increasing expectations for a September Fed hike.

- Kevin Warsh has kept another rate increase on the table.

- Markets were pricing roughly a 60%-plus chance of a quarter-point September hike.

JOBS REPORT CRUSHES ESTIMATES

- August payrolls rose 162,000 versus roughly 56,000 expected.

- July was revised from a 23,000 decline to a 21,000 gain.

- Unemployment held at 4.1%.

- Labor-force participation rose to 61.6%.

- Wage growth eased to 3.1% year over year.

MAPQUEST IS NO. 1 AGAIN

- MapQuest jumped from No. 128 to No. 1 in the U.S. App Store.

- The surge followed its decision to keep the Lake Ontario name.

- More than half of its 2026 U.S. downloads reportedly came in just a few days.

- Google Maps now shows “Lake America” for U.S. users.

AUSTRALIA JOINS THE BOND SELLOFF

- Australia’s 10-year government bond yield climbed above 5.1%, its highest since 2011.

- The three-year yield also jumped as traders priced more central-bank tightening.

- Australia joins the U.S., Japan, Germany and U.K. in the global yield surge.

DICK'S GETS HIT BY FOOTWEAR

- Dick’s shares fell more than 25% after earnings.

- Earnings, revenue and same-store sales missed expectations.

- Foot Locker also disappointed after the acquisition.

- Management cited heavier promotions, fewer product launches and discounting of older shoes.

 

 

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