Category: Uncategorized

* Of a credit spread kind…

Eurozone bond spreads keep widening as Spain’s snap-election announcement adds to France’s debt and budget fears. France’s 10yr spread over Bunds widens 4.7bps today, Italy’s 4.6bps, Spain’s 4.3bps. Germany remains a safe haven: only Austria, Latvia and Lithuania outperform Bunds… pic.twitter.com/1HKJjsySiS

— Holger Zschaepitz (@Schuldensuehner) October 5, 2026

Positions: None.

From Peter Boockvar:

Our product might kill you but buy our stock anyway/The revenue needed/Other notables

Oura’s IPO is a casualty of the segment of the market that trades terribly (responding to higher interest rates and energy prices), saying “it is postponing its previously announced initial public offering on Nasdaq, despite strong demand, due to uncertainty in the IPO market.”

Now saying they have ‘strong demand’ but there is ‘uncertainty in the IPO market’ sounds like a Yogi Berra quote, ‘the restaurant is so crowded that no one goes there anymore.’ It seems to be mostly a price issue and that maybe they just didn’t want to sell stock at the price on offer.

The mother of all IPO’s though that really matters is of course Anthropic where more financial and disclaimer detail’s (like there is a modest chance that we’re all going to die because of their product) are coming out.

Bain & Co released a report today giving their estimate of what revenue is needed in order to make all this spend worth the investment. In their 7th annual Global Technology Report, it finds “that funding AI’s insatiable compute demand would require $6 trillion in annual revenue by 2031 and much of the value lies in new innovation – beyond employee productivity.”

Where is that going to come from you ask? “Existing applications of AI will grow. Consumer AI, through subscriptions and advertisements, and enterprise AI, through software development, sales, marketing, customer service, and IT operations, could total between $1.2 trillion and $1.8 trillion in revenue.”

As for the estimated balance, “Bain’s research finds four key categories that are likely to fund the remaining $4.2 trillion of new revenue.”

1)”model providers are replacing search engines and integrating ads to generate new revenue.”

2)”autonomous everything particularly in automobiles, trucks, and drones, as well as other industrial automation, will create new products and services.”

3)”physical AI, including simulations, digital twins, and robotics, will unlock a wide range of new applications in R&D and manufacturing.”

4)”new products and uses that don’t exist today will enable new markets and opportunities from abundant intelligence – these may include drug discovery, mental health, and energy generation.”

Their bottom line, “The debate today is fixated on employee productivity. The economics of AI infrastructure demand trillions in new revenue beyond productivity gains. What the industry needs is a wave of innovation that will dwarf what mobile and cloud unlocked” said the Chair of Bain’s global Tech practice.

Let’s hope considering the ginormous amount of money being spent. https://www.bain.com/about/media-center/press-releases/2026/global-ai-market-could-hit-$6-trillion-annually-by-2031-through-unlocking-value-and-innovation–bain–cos-7th-global-technology-report/

The September Dallas Fed’s manufacturing index was out yesterday, little changed at 9.8 vs 11.6 in August but always the comments released are the interesting insight. Component wise of note, prices paid rose to the highest since June 2022. A few comments:

From a Beverage & Tobacco Product Manufacturing company:

“Tariffs and fuel prices are affecting incoming and outgoing products/costs. Customers have hit the limit on what they can pay. We are getting pushback and cancellations.”

From some Machinery Manufacturers, with some benefiting from data center construction:

“Fuel costs (diesel, in particular) are adversely impacting our bottom line and that of our customers.”

“Fuel costs (diesel, in particular) are adversely impacting our bottom line and that of our customers.”

“Oil companies are spending money at a much higher rate than expected.”

“Sudden unexpected surge in new orders after 2-3 months of slowing down.”

“Upcoming elections and uncertainty over continuing tariff and trade negotiations, Middle East disruptions and increasing costs create a volatile environment for business. It becomes a high-stakes gamble.”

From one in Misc Manufacturing:

“We are now facing increased difficulty obtaining raw materials domestically. Items that were readily available now take long lead times or are not available in the same specifications we have historically purchased.”

From one in Nonmetallic Mineral Product Manufacturing:

“The price of diesel fuel is hurting our gross margin. We are unable to pass this through to our customers. We are bidding new jobs using $6.00 [per gallon] for diesel cost.”

From one in Plastics & Rubber Products Manufacturing:

“Broadly speaking, very little to no manufacturing growth exists as pricing is being driven down by Asian and Chinese suppliers. AI and heavy transportation are growing. Other sectors are weak.”

From one in Transportation Equipment Manufacturing:

“High interest and energy costs are a double hit. We can’t do any planning.”

Beginning about now, post summer, rental growth seasonally slows down and that was reflected in the September National Rent Report from Apartment List. The national median NEW (as opposed to renewal which always runs well above) rental rates fell by .1% m/o/m and by .4% y/o/y. They did say though that “y/o/y growth has been steadily inching up and the vacancy rate is moving down, signaling a gradual tightening of rental market conditions.”

And, “This is the first month in years that rent growth has outpaced the pre-pandemic average, offering the clearest signal yet of the rental market’s rebound…we have now clearly hit an inflection point, signaling that the rental market is finally stabilizing as construction slows and the recent influx of new units gets absorbed.”

This is something I’ve been talking about all year that we had to enjoy the rent deceleration while it lasted (in response to the huge supply that can online) because it wasn’t going to last as those units get absorbed and new construction slows. Of course a mortgage rate now above 7% also drives more renting and less home buying.

We’re long Camden Property Trust, a sunbelt focused mult family landlord and whose stock has gotten hurt by the rise in interest rates.

The Reserve Bank of Australia raised interest rates by 25 bps as expected to 4.6% in a unanimous vote. They said in their statement, “Since the previous meeting, some of the upside risks to inflation are materializing…Higher fuel prices have partially been passed through to prices of other goods and services. This inflation impulse is in addition to the effect of capactiy pressures in the economy…The board remains focused on ensuring that high inflation does not become embedded.”

As the RBA did not commit to another hike just yet and Governor Bullock said this might be it, the Aussie 2 yr yield fell 7 bps after rising by 12 bps over the prior three trading days. The Aussie$ is a touch lower too while the ASX rallied by .3% on this possibility of no more hikes.

The ECB might not be done hiking rates after Spain said its September CPI rose 4.9% y/o/y, up from 4.3% in August and above the estimate of 4.6%. Energy was a key driver for sure but the core rate was still up by 3.1% y/o/y vs 2.9% in the month before and one tenth above what was expected.

Also out in the region, the September Eurozone Economic Confidence index fell to 97.9 from 98.4 and vs 97.1 in July. Manufacturing keeps improving and services ticked up but consumer confidence slipped as did retail. Construction was unchanged. Nothing market moving here.

Position: None

Interesting options trading comments:

Frdgrouper

Under the FWIW heading. I know some of you are option traders, so I’m going to suggest you become familiar with rule 390. I was aware of the rule previously only because a friend was wired to the CBOE. I trade on TOS and in May and June traded quite a few options. 390 is as it sounds. If you average more than 390 contracts a day for a month you will be labled a professional “W” for three months. This puts you in the penalty box because price improvement, openning participation etc. are a thing of the past. It is very difficult to trade unless you hit a bid or take an offer under this scenario. There is no warning to this penalty. In fact you really don’t even know you are being punished except that your trades aren’t getting executed. It is up to you to make this discovery. There is a new rule pending where a one month penalty may be applied. I have applied for this but so far no answer. i doubt Charles Schwab will rule for me as opposed to the liquidity providers that pay CS for each order. You would think that 390 is a giant number but the rule counts any cancels or cancel replaced orders as well. There is no running total available so you must keep track on your own. I find it offensive that first time abusers are held to the same standards as serial abusers. Rant over.

Position: None