Silicon Investor - Bear!

[Harshu Vyas] Anyone else think the market is being very complacent here? Haven't felt this m...

Harshu Vyas — 4/14/2026 12:01:20 PM

Anyone else think the market is being very complacent here?

Haven't felt this much fear in a while. Liquidated all of my UK positions. Haven't EVER done that. Always felt UK is safer than the US (in terms of valuations).

But I just can't help thinking something is brewing.

Either way, the market's ripping. Idk who's buying these dips. But I'm not convinced it's smart money.

Still don't really buy the AI bubble claims.

But energy inflation... interest rates... supply chain inflation... I just don't think markets are considering this could go on for a while.

It's higher costs that could pop the AI boom.

And I cant help thinking all of this geopolitical uncertainty plays right into China's hands.

I'm betting on a long war. Don't see it resolving quickly.

[Harshu Vyas] I agree with a fair bit that you say tbh. Specifically about the company analysi...

Harshu Vyas — 2/27/2026 7:30:35 PM

I agree with a fair bit that you say tbh. Specifically about the company analysis.

Where we differ I think is mindset, positioning and "the when." Btw, The Shawshank Redemption is a pretty awesome movie :)

I definitely disagree with you about Michael Burry. Honestly, he's slightly lost the plot.

The movie made him cooler than reality... significantly (and unintentionally) - a whole generation of ppl now looking for the next big short. The book did, too.

And when you consider the fact the Michael Lewis was overly sympathetic to SBF... maybe he got it wrong with Burry, too.

This whole "sell" banking crisis thing is total BS and spin. I remember when he tweeted about "frauds" and how SIVB was our "Worldcom" and "more to come." He was wrong. Badly. He's more like Nostradamus than Casssandra. He shouts out many awful predictions and if they kinda stick he boasts he was right.

Ok, he's clever. But he's delusional (or a liar). And that's dangerous.

GME and Ryan Cohen is also insane. Cohen is not "Buffett-like" in any way. Cohen is literally a market manipulator. Also bonkers.

Possibly right about MOH and FOUR - Idk them well enough and I concede he's a pretty epic value investor. I'd always back him any day in sheer fundamental stock picking ability. He's just not what the investing community make him out to be. Burry puts out there...? I think the market overvalues him.

That said, AI is deflationary as a tool for efficiency. Fact. If AI does make breakthroughs, that's when I'd turn bearish and start to position for something different.

[Sean Collett] Harshu, I suppose when former bears start to capitulate that's a toppy sign ;) J...

Sean Collett — 2/27/2026 1:00:05 PM

Harshu, I suppose when former bears start to capitulate that's a toppy sign ;) JKJKJK

I don't think anyone is advocating to go short and blow coin on anything. I am not. There is a lot of incentive to keep the market floating. President Trump made multiple mentions to the stock market in his SOU the other night and that alone should give one pause. Will it be enough though? The taller the Jenga tower gets though the less support at the bottom and then a small breeze is all it takes.

These things take time. Shawshank Redemption, Harshu. I think of this quote:
"Oh, Andy loved geology. I imagine it appealed to his meticulous nature. An ice age here, million years of mountain building there. Geology is the study of pressure and time. That's all it takes, really. Pressure, and time. That and a big damn poster."

The poster this time is "AI" instead of Rita Hayworth. Covering the economic issues that have been slowly forming. Those bankruptcy stats are real regardless if one considers them or ignores them. And as for those tech cash flows, FT Alphaville gives us something to consider there too:

<<Read a piece in the FT about how insurance and private credit are intertwined and the risks that poses.>>
I suppose no need for me to read that to get a sense of risk. I wrote an entire piece on Private Credit back in December. If you are bored feel free to take a look: Private Credit....this time is different.

Much of what I wrote about is already starting to play out too. Just a few months later.

<<Sadly, it pays well to be a doomer on Substack or Twitter.>>
I am a doomer :) yet I have been able to adjust my port to move as I see opportunity. I don't make any Substack money though :( It has not cost me much though either. Maybe some opportunity cost by not jumping in, but I added Google when everyone wrote it off even with my bearishness. It's not been bad at all. Managing risk though should also be considered.

<<Biggest mistake I ever made was idolising a Cassandra. Being an optimist (not to be confused with delusion) pays better.>>
I think too many take being told of risk as an immediate flag of "I need to take action" and that's not the case. Even with a Cassandra. These economic cycles take pressure and time to form. I remember reading on SI that Dr. Burry had become bearish in 1996, years before the dot-com bubble finally burst. Will this time be different? No. Did Mike go net short in 1997 and miss gains? No, and his writing here is proof of that.

I note you now say AI has been a bubble since 2023 but that was not the case earlier. So I aim to size this bubble and risk forming a bit. So let's go back to CoreWeave for a moment please.

CoreWeave has $21.4B of total debt and $6.7B of that is listed as current. Interest expense is already eating up 24% of revenue. Lets frame this: the company will have to roll $6.7B of current debt.
1) They are unable to do this and default
2) They are able to do this but the debt reprices higher. Does +30-35% of interest expense eat revenue?

Now you wrote:
<<Capex is being funded by cash flow/cash treasure troves not debt for big tech.>>

And I suppose if this company has that much debt then it goes against that notion. Also when consider the FT Alphaville chart it would seem all this investing is starting to eat away furture cash flows. There is a maintenance CAPEX component that gets missed here and these investments funded by cash flows will also require more cash flows to maintain, update, and run. Also if only cash flows are being used, why has $META long-term debt increased by 104% in one year ($58,744M vs. $28,826M)? And this doesn't even cover the JV with $OWL either.

Back to CoreWeave. CoreWeave which is a debt mule is now also forming an SPV with OpenAI creating its own debt mule. Neither CoreWeave of OpenAI make any money. The increase of the off balance sheet risk and the root grow deeper or the Jenga tower taller; whatever image works for you.

Bubble or not this is a perfect setup of pressure and time. The longer it goes the taller the Jenga tower gets. All that's needed is a change in demand.

Now if CoreWeave fails let's think of the second order effects. Current GPU, memory, and other components are driven on demand outpacing supply which allows NVDA to charge premium for these which is why their gross margins are so high. If CoreWeave fails then a LARGE NVDA customer stops buying and potentially also floods the market with GPU's which increases supply and lowers price. Now I'm Satya from Microsoft who paid $x for GPU's that are now going for $y. Coupled with NVDA will also be releasing a new GPU version next year which further impacts current pricing.

Now this will start to impact NVDA revenues because the secondary market is flooded and the primary market is lowering prices to drive unit volume. This is likely why you see NVDA make a $2B equity investment into CoreWeave. Not because CoreWeave is the best business but it's because it's pure self preservation. They will need to step in again I can almost guarantee it.

So , bubble or not there is risk. Oracle is another debt mule that exists. NVDA is exposed to it all. All of it.

From a positioning view if I feel CoreWeave is going to fail maybe I look at January 2027 PUTS. Today $40 strike PUTS for CoreWeave have an IV of 97.18% but even if I push my strike up to $70 I am still looking at almost 92.23% IV. Now if I think CoreWeave will fail and I know NVDA is exposed here then why not look at them instead? January 2027 PUTS for an $80 strike come with an IV of 57.21% and $140 strike have IV of 48.87%. The bid/ask spread is also a bit tighter of NVDA than others too which makes them a decent look. If I see a bubble forming and think ORCL or CRWV may fail then I can look at NVDA who is exposed on every side and buy duration exposure for cheaper.

That said if we do get a crash it's not one I hope for. The economy is more the stock market today than ever before. U.S. has no safety net so most are relying on housing appreciation and the stock market. Compensation is directly tied to the market for more folks today than ever before. Given the flood of retail, ETF's, and whatever else the flow reversal could be swift too. Margin use requires swift unwinding. The unemployment game switches fast. I don't hope for a crash by any means. It presents a nice buying opportunity, but the risks are large.

One last thing. Inflation. I pivot there for a moment. I kept asking myself if there was a way to forecast where it's going. I built a model that so far has been holding in a range that's pretty decent. Basically, I am looking at a lagged view of money supply changes and that's driving where CPI goes as I've written before is usually the case (if you believe in QTM which I firmly do). If I am right, then March 11th we may see CPI decline further into the 2.0% (325.45) - 2.2% (326.1) range with slight top range of 2.7%.

So far this has kept me grounded as the inflation folks continue to pound the table. I just don't see it. And that was with me seeing inflation was not "transitory" in 2021 too. Again with the QTM. With tariff policy being overturned too that should reduce some forward price level pressures too and remove the smoke screen the fed has been trapped into.

I continue to add to my long duration TLT investment based on where I see things starting to go.

That's enough for a while from me.

Happy investing,
Sean

[Harshu Vyas] AI's been a bubble since 2023. Private credit's been a bubble since even earlier...

Harshu Vyas — 2/26/2026 6:31:52 PM

AI's been a bubble since 2023. Private credit's been a bubble since even earlier. Higher rates were meant to be the catalyst. Capex is being funded by cash flow/cash treasure troves not debt for big tech.

Unless you're ORCL, it's not a problem.

Being a bear doesn't pay. And eventually one must concede that times are different. I'm all for a market correction. And obviously every day that passes the more likely it becomes.

However, the cause has not been correctly identified.

Maybe SaaS/software is a bubble. That's popping. Proving that markets can be ruthless when they feel like it.

But AI/private credit are not the right places to look. We're one major breakthrough away from this being game-changing. Unlike dotcom, it's not like Wall St run out of cash to issue. It's only sky high valuations. And TSLA proves that markets can stay irrational for an insane amount of time.

Read a piece in the FT about how insurance and private credit are intertwined and the risks that poses.
How insurance became the lifeblood of private credit - except I was making that point years ago on Twitter.

Sadly, it pays well to be a doomer on Substack or Twitter.

But as an investor - buying stocks is the way to go.

At some point, it's returns you have to get. Else you're doing a poor job. And for us retail guys it's not that difficult. Just trawl through lists of small companies and swing hard when you see something that's obviously wrong.

Like one company I've recently bought into - Touchstar PLC (mobile computer devices).

Market cap = £5m. Net cash = £2m. CEO has acquired £200k of stock in the last couple months. Now owns 4%, despite being a regular employee a year ago. Are also making their accounting more conservative and rethinking business strategy. Moves I love to see.

Underlying business is cash generative but stock fell 20% on weak results and a surprise loss. Poor cash conversion cycle is what I noted back in June last year but, hey, it's the future that counts -- and, although, the future is never clear it's the signals that matter most.

Could be wrong. I've been wrong many times before. But small, illiquid and aligned (new) management is a formula that's worked. And that's far more important than caring about what may happen in a doomsday scenario.

Biggest mistake I ever made was idolising a Cassandra. Being an optimist (not to be confused with delusion) pays better.

All of that said, I wouldn't mind a massive crash. Maybe you're right. I just don't see it yet. Tbh, I don't really disagree. I just don't agree enough. >g<

[Sean Collett] So continue to watch the AI space because it just gets more silly. Sorry, Harsh...

Sean Collett — 2/26/2026 5:38:18 PM

So continue to watch the AI space because it just gets more silly.

Sorry, Harshu, I disagree this isn't a bubble too. Still think we get some major trouble in the private credit space and if you watch $OWL that seems to be the canary. They have a joint-venture with $META too to invest and build data centers.

CoreWeave just announced their earnings and man if this doesn't scream trouble.

$5,131M in revenue and ($46M) of operating income. $2,454M of D&A though! Brings EBITDA (my calculation) to $2,408M. Of course CoreWeave offers their adjusted EBITDA which includes $1,229M of interest expense, $630M of SBC, and a few other things which brings them to Adj. EBITDA of $3,093M for an EBITDA margin of 60%! Some marketing spin to turn that ($1,167M) GAAP loss into a positive.

CAPEX as a % of revenue is 200.92% in 2025. Presentation shows increase of $21,061M in property and equipment but of course they remove $6,175M of construction in progress which takes CAPEX to $14,886M.

FCF was ($7,280M) using a traditional calculation BUT if you include SBC ($630M + $144M for tax withholdings on RSU’s) and the $108M for business combinations then FCF was ($8,162M). Core cash flow using this conservative method (before WC) was ($8,794M). Cash flows likely worse too if you factor the CIP into the mix as the cash flow statement only lists $10,309M for purchase or property and equipment.

Revenue backlog sitting at $66.8B which is their current marketing. “More than 4x YoY”! Ignore that accounts receivable sits at $3,169M which is up from $417M in 2024 and brings DSO to 225.43 and DPO sits at 407.7 for 2025.

$6,708M in current debt and $14,665M of long-term debt giving total debt of $21,373M. Net debt/EBTIDA of 7.58x and that’s beyond misleading too given D&A is so high.

A few months back CoreWeave adjusted the terms of their credit agreement. The 8-K stated:

"On December 31, 2025, CoreWeave Compute Acquisition Co. VII, LLC (“CCAC VII”), a Delaware limited liability company and a direct subsidiary of CoreWeave, Inc., a Delaware Corporation (the “Parent”), the Parent and CCAC VII Holdco LLC (“CCAC VII Holdco”), a Delaware limited liability company and a direct subsidiary of the Parent entered into an amendment (the “First Amendment”) to amend (i) that certain Credit Agreement, dated as of July 28, 2025 (the “DDTL 3.0 Credit Agreement”), by and among CCAC VII, as the initial borrower, CoreWeave Compute Acquisition Co. V, LLC, a Delaware limited liability company and a direct subsidiary of the Parent as the co-borrower, MUFG Bank, Ltd. as administrative agent, U.S. Bank Trust Company, National Association as collateral agent, U.S. Bank National Association, as depository bank and the lenders party thereto and (ii) that certain Parent Guarantee and Pledge Agreement, dated as of July 28, 2025, by and among CCAC VII Holdco as the Pledgor, the Parent as the guarantor and U.S. Bank Trust Company, National Association as collateral agent.

This amendment to the DDTL 3.0 Credit Agreement aligns the facility for the timing of deliveries described by the Parent on its earnings call reporting financial results for the quarter ended September 30, 2025. The First Amendment includes certain amendments to the financial covenants in the DDTL 3.0 Credit Agreement, including (i) reducing the minimum liquidity amount for the monthly payment dates ending on and after March 1, 2026 and prior to May 1, 2026 to $100.0 million, (ii) postponing the initial testing date of the debt service coverage ratio financial covenant until October 31, 2027 and (iii) postponing the initial testing date of the contract realization ratio financial covenant until February 28, 2026. The First Amendment also permits an unlimited number of equity cures for any failure to satisfy the debt service coverage ratio and contract realization ratio financial covenants prior to October 28, 2026, and thereafter equity cures with respect to such financial covenants may be utilized no more than three consecutive calendar months in any four consecutive calendar month period.

The foregoing description of the First Amendment is qualified in its entirety by reference to the text of the First Amendment, a copy of which will be filed as an exhibit to the Parent’s Annual Report on Form 10-K for the fiscal year ending December 31, 2025."

And then on January 26th, 2026 NVIDIA "Strengthened" their collaboration with CoreWeave by buying $2B of CoreWeave stock at a price of $87.20/a; the share price of CoreWeave closed at $92.98 on January 23rd. This screams of an intervention by Jensen Huang and the NVIDIA team. After this move NVIDIA became the second largest shareholder of CoreWeave.

CoreWeave has a SPV with OpenAI that is designed to also raise its own debt. So there is going to likely be some off-balance sheet risk forming here too potentially. Since neither CoreWeave or OpenAI make any money wonder who pays for all of this?

There are just too many ties between these companies now to not consider it a bubble.

Happy investing,
Sean

[Sean Collett] Yeah, I agree the more thought I gave after seeing the details. WBD has had some...

Sean Collett — 12/5/2025 3:25:58 PM

Yeah, I agree the more thought I gave after seeing the details. WBD has had some big duds in their own content but it does give Netflix pure rights to DC, Harry Potter, and a few other franchises. Now that they own real studios it also gives them some rights there that Netflix previously was denied and it's already got Cinema United up in arms.

I mean Disney bought Marvel for $4B and Star Wars for $4B and I think both of those are much stronger franchises than what Netflix is getting. I am not sure DC is worth it as they cannot get anything to stick outside of Batman and Harry Potter is probably the next biggest franchise but it's a rather insane asking price. Disney bought 21st Century FOX for $71B and I am not so sure they have gotten the ROI from that one.

If WBD had been able to get any franchise to move in the past few years I may hold a different view but given Netflix content track record and WBD sucking I am not sure this changes too much.

-Sean

[Harshu Vyas] It's literally stupid. The fact is that Warner Bros and Discovery couldn't make ...

Harshu Vyas — 12/5/2025 3:09:10 PM

It's literally stupid. The fact is that Warner Bros and Discovery couldn't make it work. Too much debt. Slash and burning costs didn't work.

Zaslav's solution is... to sell. So which idiot would then takes on WBD's debt - and borrow more debt - to acquire the thing (and not even the whole thing)?

Zaslav got a "get out of jail free" card there. And I'm sure there are plenty of shenanigans involved. Maybe not accounting, but I remember when I gave up on it I had a suspicion they were cutting more than just "noncore" expenses.

The more I think about it, the more I realise t's a shitshow. I've never read anything so stupid since Salesforce and Slack. I just can't believe it. Netflix are going to bankrupt themselves over something they never needed. If they're lucky, they'll be able to spin off (no pun intended) parts but it just seems so excessive.

I don't care what franchises you own, if you borrow $100 for something worth $5 on scale, you're bound to have a terrible result. And, yeah, I'm saying the equity of WBD should be much closer to zero.

I mean, come on, WBD was literally a distressed equity play this time last year because their efforts to purge the debt were to be in vain. What the hell changed? Worse, what are NFLX thinking?

This is more "bubble"-y along with the private credit stuff than AI imo. It's leverage on steroids for something that's going to depreciate and become less relevant over time. I've never shorted in my life but, my gosh, I'm tempted now.

[Sean Collett] I did just see Netflix is taking on $59B in debt to fund this LOL " Netflix Inc...

Sean Collett — 12/5/2025 9:15:47 AM

I did just see Netflix is taking on $59B in debt to fund this LOL

" Netflix Inc. has lined up $59 billion of financing from Wall Street banks to help support its planned acquisition of Warner Bros. Discovery Inc., which would make it one of the largest ever loans of its kind."

So with that detail that is a bit silly. Well, we will see if this turns into what Peter Lynch would call a "diworsification".

-Sean

[Sean Collett] To be fair to AOL-Time Warner AOL was playing all sorts of games with revenue an...

Sean Collett — 12/5/2025 8:21:40 AM

To be fair to AOL-Time Warner AOL was playing all sorts of games with revenue and booking things as revenue that was really not. This kept inflating their stock price which allowed them to make the merger happen with them taking the drivers seat.

$WBD has been depressed in price since it formed and $NFLX is very much a cash generator.

I am on the fence with this one. Likely they overpaid (but I was not an investor in either) but it's defensive for Netflix to have that deep library on its platform without risk of it getting pulled. Netflix has spent so much on original content the past few years and NONE of it is really memorable so I would think they pull back on that garbage now as they can use the better studios and teams from their new child?

It does make a terrible CEO, David Zaslav, look good though. What I find most interesting is John Malone spent the back half of his new book complaining about Big Tech and their deep pockets.....only to see one of his sell to Big Tech.

-Sean

[Harshu Vyas] More on it - you've effectively turned a capital-lite platform business into a c...

Harshu Vyas — 12/5/2025 8:17:31 AM

More on it - you've effectively turned a capital-lite platform business into a capital-intensive media heavyweight.

Wall St are valuing "assets" and "asset potential" through the content library narrative here not actual "earnings." I think it's a huge blunder. You're bringing in massive uncertainty to your capital structure - more so, when you consider inevitable restructuring costs that will run into the billions of dollars - for no cash flow certainty.

WBD realised they couldn't keep slashing and burning forever so they passed the parcel. Gosh, it seems so stupid.

*Also, I said merger in my above post. Meant acquisition. Brain fart.

[Harshu Vyas] OT: But my gosh! Netflix to buy Warner Bros film and streaming businesses for $7...

Harshu Vyas — 12/5/2025 7:51:17 AM

OT: But my gosh! Netflix to buy Warner Bros film and streaming businesses for $72bn - BBC News

I think this is a terrible merger. I mean, immediately value destructive. Idk how it'll be funded - probably stock + cash because of the size and NFLX's balance sheet - but do these big players not realise this is a highly competitive market?

You're competing with Tiktok, YouTube, Spotify, video games and so many non-franchise films/shows being released every week etc. You're competing for an individual's time. And it's easier for a person to doom scroll.

I mean, the value of a franchise is not what is was pre-21st century. Take Disney's acquisition of Star Wars.
Started off sweet.. now who cares? Is The Mandalorian even still going?

My dad - a diehard Star Wars fan having watched them in the cinema as a boy - finds himself watching the originals when they come on TV because they're just "better." Prequels, sequels and spin offs are not the route to success.

And now Netflix are pursuing that strategy. The AOL-Time Warner of this generation? It's too big and the payoff doesn't seem great enough.

[S. maltophilia] CLO.... Brings back memories.

S. maltophilia — 11/20/2025 5:05:24 PM

[Sean Collett] [graphic] Per Bloomberg today " A portfolio of private credit loans managed by ...

Sean Collett — 11/20/2025 4:56:33 PM

Per Bloomberg today " A portfolio of private credit loans managed by BlackRock Inc. has performed so poorly that the money manager has waived some management fees – a rarity in the credit world.".

Few CLO's to keep on your radar:

Happy investing,
Sean

[S. maltophilia] More bubbly fun: ... But there’s a lot more to this story, tangled up with yet ...

S. maltophilia — 11/19/2025 5:11:45 PM

More bubbly fun:

... But there’s a lot more to this story, tangled up with yet another rebrand by the former masters of the universe, from “shadow banks” without proper regulation into something boring and neutral-sounding: private credit. Ever since the advent of financial regulation, there have been companies that...

prospect.org

[Sean Collett] Dear Bears, The fun in China continues post Evergrande as " Banks in Asia are g...

Sean Collett — 11/17/2025 9:46:33 AM

Dear Bears,

The fun in China continues post Evergrande as " Banks in Asia are getting caught in the latest flare-ups in China’s real estate crisis, as more than $1 billion in property-backed loans is at risk of default unless extension or refinancing deals can be reached.".

It came out Friday that GAW Capital Partners risks a default on a $260M Shanghai property loan; they missed a payment and technically creditors can call the loan. GAW received an extension of this loan already on November 2024 and now is trying for another. The purchase for this property was originally $421M (3 billion yuan). They have another $110M loan that matures November 24th too.

Isn't it interesting that just a few weeks before this GAW decided to wind down business in the West to focus on Asia? Things that make you go hmmmm.

Just in April GAW was raising $2B for its Gateway Real Estate Fund which aimed to invested in private equity and credit deals and now is at risk of default and closing operations in the west?

Our friends Blackstone are also in the mix here too, of course. Bloomberg reported on October 27th, 2025 that in 2014 Blackstone invested $90M into a retail space and today the value is less than half of that and $BX is trying to renegotiate terms. The article stated "that’s eroding the collateral value behind many bank loans, which could lead to margin calls, refinancing challenges and in more severe cases distressed asset disposals.". They have taken multiple hits trying to sell property they are underwater on here.

What I find also interesting is in May it was reported that banks were trying to pare exposure while private credit funds, like GAW, were trying to get in by launching new funds. Now here we are in November and GAW is at risk of default.

Meanwhile Chinese GDP is on track to continue to slow and possibly head below the government goal of 5%.

Current growth is likely fueled by the stimulus that China's PBOC has been pumping since things began to hit in 2021 with Evergrande and never really recovered. Continued property troubles will not ease the situation. China has continued to fight off deflation and even with a recent small boost it is not enough to reverse any trends. Bloomberg analysts also showed that some 70 everyday products and services dropped more sharply than the headline CPI.

China's factory output and retail sales grew at their weakest pace in over a year as tariff war impacts demand:

As this drags on it will continue to pull valuations down and impact loans. Headline figures are likely being propped up by the government/PBOC but lower demand will continue to press cash flows making refinancing a challenge over there.

Shanghai containerized freight index paints a picture of lower spot rates as demand is likely being constrained. SCFI now sitting at 1451.38 and down from 2024 highs.

Pivoting to the U.S., former fed member & Vice Chair, Lael Brainard, came out and stated a few days ago she would support a EFFR cut as the U.S. economy is seeing cracks under the hood and it's all being masked by AI.

What cracks? For starters construction employment continues the YoY decline which has usually been a good signal that a recession is in the works:

Currently the All Employee, Construction chart from FRED shows YoY change is now at 0.7 and starting to touch towards going negative.

According to RESI "for the first time in modern housing market history, U.S. single-family new construction, in aggregate, is no longer selling at a premium to existing homes. According to the ResiClub New Home Premium Index, the median sales price of new single-family homes in August 2025 was -0.2% lower than the median sales price of existing single-family homes—an all-time low".

Manufacturing PMI shows contraction in October at 48.7%, which follows two months expansion but itself was preceded by 26 straight months of contraction - stated in the October PMI report "economic activity in the manufacturing sector contracted in October for the eighth consecutive month, following a two-month expansion preceded by 26 straight months of contraction, say the nation's supply executives in the latest ISM® Manufacturing PMI® Report":

Then we have places like $MCD, $CMG, $SBUX, and other food places stating they are losing low income consumers as they can't afford current food options. A study titled " The State Of The Nations Housing" by Harvard University stated "for the third consecutive year, the number of cost-burdened renters reached another record high in 2023 at 22.6 million renters (50 percent). This includes more than 12.1 million (27 percent) who are severely burdened, spending more than half of their income on housing and utilities.". Folks now are being forced to choose between luxuries and simply staying in their residence. I suspect this is likely why we see the current administration now walking back tariffs on beef, coffee, and some other food items as of Friday November 14th, 2025.

CASS Freight Index on shipments and expenditures is trending into recession territory as well:

There was an August 2025 article written by Michael C. Randle in the Southern Business & Development that stated "Based on raw but triple-checked data, this is the worst six-month period in the South’s modern economic development history regarding job- and investment-generating deals announced publicly by a corporation. By rule, if the deal is not publicly announced by a member of the company making the investment, it is not a deal to SB&D. It’s a dog.

These numbers are also worse than any recession I have covered since 1983. So, in short, the worst we have ever seen, even if technically the U.S. is not in recession.

And if deals are cratering like this in the South, the most desired economic development region in North America, then they are much worse in the Midwest, West and the Northeast. SB&D does not cover economic development in those U.S. regions. ".

Like I wrote in post 262 "2024-2025 business chapter 11 filings are highest since 2014 and this is in a world of LME's. Chapter 7 filings are on par now with 2020. AMZN cutting 14K, UPS cutting 48K, Paramount with 2K, TGT with 1.8K, Nestle with 16K, Lufthansa with 4K, GM with 1.2K." and now Verizon with largest cut in their history with 15K or 15% of the workforce. Then a silicon chip software designer Synopsys is laying off 2K in Bay Area.

Liquidity wise, the U.S. has the over night reverse repo sitting now at $1.559B as it has been drained from the $2T highs and this at the same time bank reserves themselves are starting to trend down - now below $3T:

We have markets making new highs all the while the above are taking place. We now also have QT ending December 1st, 2025 and Reuters reported that " New York Federal Reserve President John Williams reiterated on Wednesday the time is getting closer when the U.S. central bank will have to restart bond purchases as part of a technical effort to maintain control over short-term interest rates". I don't expect a quick pivot into QE but I think the fed will be forced into more action than they anticipate in coming quarters.

Why? The problem for the fed is there is no telling how deep leverage goes. I mentioned before about KKR but if we take them as only one example KKR owns about 25% of Marshall Wace and Marshall Wace gave $1B to Northridge. Now that's a few links in a chain that if anyone breaks it impacts the rest. Throw in we have so much growth in private credit that even banks are feeling they're missing out. PwC stated banks risk missing $70B in annualized lending revenue and with the amount of refinancing coming due they will want a piece without the restrictions they face. Then you have consumers racking up revolving credit and even leveraging BNPL programs to keep current lifestyles floating.

Leverage is just flowing everywhere and with weaker growth this leverage becomes much harder to control. Cash flows get squeezed, covenants should get tighter, and dogcrap is asked to pay dogcrap prices.

And that brings us to equities. Shiller P/E touching 40 and currently sitting at 39.72 while FINRA margin use made new highs in October at $1,183,654M all while the S&P 500 does the same (using SPY):

I bring back up this paper titled " IN SEARCH OF THE ORIGINS OF FINANCIAL FLUCTUATIONS: THE INELASTIC MARKETS HYPOTHESIS" where the authors found both "theoretically and empirically" that money flows have a great impact on price and risk premia. They found that $1 invested increased value by $5. Now with leverage use this high it isn't hard to imagine a scenario where a domino falls, maybe starting in China, maybe in the U.S., maybe elsewhere, and the need to cover creates a rather large snowball effect as flows move the other way.

With Lael Brainard stating cracks are starting to form under the hood of an economy increasingly defined by an AI-fueled divide, perhaps this is the entire point Dr. Burry is making with the depreciation posts. If the superficial market is driven on AI, as even Brainard states, and if the earnings are indeed overstated then perhaps valuations are too (they are). We're living on the greater fool theory to keep it going.

I mean here we have a report that data centers in Nvidia's hometown are sitting empty as they can't get power and even Satya Nadella is saying $MSFT is sitting on inventory they can't deploy because of power and yet the spend into AI just keeps increasing. Satya stated "The biggest issue we are now having is not a compute glut, but it’s power – it’s sort of the ability to get the builds done fast enough close to power. So, if you can’t do that, you may actually have a bunch of chips sitting in inventory that I can’t plug in. In fact, that is my problem today. It’s not a supply issue of chips; it’s actually the fact that I don’t have warm shells to plug into.".

How can $MSFT, $GOOG, $ORCL, $META, and others all be increasing useful life for depreciation at a time where some are also saying power is limiting the ability to even get going? Berstein Research notes that GPU's makeup 39% of this data center CAPEX race:

This excerpt from a book I read makes more sense, "If earnings otherwise are small this year, managers might lengthen the life of the equipment and increase the estimate of the salvage value. In this manner, depreciation expense is lowered and net income is increased. Alternatively, if earnings are healthy during this fiscal period, managers could decrease the life of the asset and reduce the salvage value. Depreciation is enlarged, but this protects the firm against the proverbial rainy day". We have large CAPEX spending into items that will likely be outdated quickly and the solution isn't one they can easily solve because the limitation is access to power supply. Money spent today to buy these things and no way to grow revenues off it, so may as well extend the life and keep the party going. Needed when so many insiders benefit from that party going too via SBC.

Meanwhile $BABA is stating they have developed a system that reduces the need for $NVDA chips by 82%. The U.S. is in an arms race and sitting on GPU's it can't leverage due to power constraints and competition is stating they've developed more cost effective ways to navigate the entire situation.

$CRWV has seen ~4% dilution since their first 10-Q released 5/15/2025. They are contractually obligated to buy only NVDA GPU's by their customers. Profit margin of -8% in Q3 but if you add back taxes, depreciation, interest expense (24% of revenue BTW), stock-based compensation, and even acquisition costs, then adjusted EBITDA is a beautiful 61%! It's bleeding cash but if you add back everything it takes to run the business, boy, the potential is huge!

18% of total liabilities come from current + LT deferred revenue and the company has at times granted payment terms of up to 360 days! SBC has increased by 1,917% since 2024 and currently is 31.6% of CFO.

$CRWV changed their useful life in 2023 which gave them a boost to earnings going from five years to six and bumped earnings $0.10 in that time. Now the problem is if they need to drop the useful life and/or salvage value then recovery value is smaller and then we head towards asset write-offs and impairments which mean their intended cash flow stream is shorter and results in impacts to cash flow assumptions and really valuations.

Oh, and calling back to ENRON days, $CRWV has a special purpose vehicle (SPV) with OpenAI where the SPV will that will hold the infrastructure and the SPV will also incur the debt to finance this! Meet the new boss, same as the old boss.

Once the exuberance wears off I think this changes the picture on valuation quickly. If $1 creates $5 of value what happens to the picture in reverse? Do we see -5:-1? Or do we see -10:-1? With leverage use this high forced selling is a real problem - more so as retail has binged on options trading at historic levels. It was just in October of this year that 108M contracts traded in a day making it the second time in history to top 100M.

It doesn't take much for the top of that K to unwind as paper profits need to be locked in and the greater fool is made aware. Pension funds, 401K, insurance...everyone has all their chips on the table.

I am not calling for a top or anything of the sort. Markets can remain irrational for a long time, especially as leverage use is in play globally. What I see is a series of large risks brewing in the market with many being intertwined. I do think we see the recession we have been funding off since 2022 in 2026. Between tariffs, tight monetary policy (which operates on a 18-24 month lag), China, and clear signs of accounting games, I believe the party will wind down. Equities usually are last to wake up and more so when we enter the "new era" speak as we are in now.

At this stage though I think to what Harry Schultz wrote in that preservation of capital should be an investors #1 goal then followed by increasing said capital. As Harry also wrote in the book "Bear Market Investment Strategies" where he stated "if you get greedy and reach for the precise top, you'll regret it, nine times out of ten". So, not a call to buy, sell, or do anything but highlight the risks I see forming in the market. My only conviction investment right now is long-dated $TLT as I explained elsewhere. I wouldn't risk puts or shorts so better to preserve capital until a clear sign forms there. I have $HAL in my portfolio which saw some nice bumps since I added 10/15 and even my $VET is finally moving. I cut my entire position on $FF on the lows it just hit. Otherwise almost a full position in $TLT and then the rest is now sitting cash.

"There were always ample warnings, there were always subtle signs
And you would have seen it comin' but we gave you too much time" - Coma by Guns N' Roses

Look forward to the discussion and any strategies anyone is taking.

Happy investing,

-Sean

[Sean Collett] I continue to watch the events in private credit in amazement. Bloomberg ran th...

Sean Collett — 11/13/2025 1:51:32 PM

I continue to watch the events in private credit in amazement. Bloomberg ran this piece today on a loan for Medallia, Inc where Apollo valued the loan at $0.77 on the dollar and KKR values it at $0.91 on the dollar. Will the real slim Shady please stand up?

I find two things interesting here; 1) the swing between high and low with Apollo currently valuing at $0.77 and FS KKR at $0.91 with the average price at $0.83 2) the rapid decline in the loan value since June 30th, 2024. Just June of 2025 Apollo had this priced at $0.87.

Blackstone ($BX) originally led the loan which is for $1.8B and now has it marked at $0.82.

"Some market participants say diverging valuations for companies coming under pressure show lenders are reaching different conclusions about how much they expect to recover on the debt and that they don’t necessarily have access to the same information from borrowers." This reminds me of something our Emcee once said to Michael Lewis “The borrowers will always be willing to take a great deal for themselves. It’s up to the lenders to show restraint, and when they lose it, watch out.”

Keep your eyes on $KKR & $BX - I know I am.

-Sean

[Sean Collett] RE: ORCL Reanalyzing I got ahead of myself on the FCF portion as I should have a...

Sean Collett — 11/12/2025 12:52:17 PM

RE: ORCL
Reanalyzing I got ahead of myself on the FCF portion as I should have added it back to depreciation which leaves cash flow unchanged. Doesn't change the EPS situation though as they got the boost but I was wrong on cash flows.

So my accounting mistake there!

The SBC situation is the same as well. Regardless highlights Burry isn't off here as the EPS improvement is decent and overstated and market had been responding.

[Sean Collett] RE: ORCL It is interesting looking at the ORCL 10-K. I am no accountant so appr...

Sean Collett — 11/12/2025 12:23:29 PM

RE: ORCL

It is interesting looking at the ORCL 10-K. I am no accountant so appreciate any discussion this creates.

Because they adjusted the useful life as Dr. Burry noted, going from five to six years, this gave them a nice boost to earnings. According to their 10-K it gave them a boost to net income by $573M in the 2025 period. So if we take the $573M out of the net income this gives us $11,870M instead of $12,443M.

This boost to net income then took EPS (using diluted shares of 2,866) from what would have been $4.14/s to $4.34/s - $0.20 or a 4.8% boost to reporting EPS.

Now the point from Harhsu was that " I think general the market just skips both and goes straight to cash flow." but the issue is this then changes the cash flow reporting too because CFO starts with net income!

The depreciation change then boosted net income which then gave a favorable impact to working capital changes as their 10-K reported:

In total this improved cash flow from operations by $2.1B over 2024! If we use the un-adjusted net income of $11,870M then FCF would have been ($967M) instead of the reported ($394M) and the CFO improvement would not have been ~$2.1B but ~$1.6B. Hard to tell what impacts this would have to working capital but I think minimal so point seems to stand.

They reported FCF of ($394M) giving a FCF as a % net income of -3% BUT if we use the net income of $11,870M this gives us FCF of ($967M) which is a % of net income of -8%!

On June 17th the stock price closed at $208.18/s and by September 10th the stock moved up $137.54 to a high of $345.72 which would be a 66% gain in 85 days. This at a time where SBC has grown to $4,674M which is 22% of CFO. For comparison between 2019-2021 SBC as a % of CFO was averaging 12%.

Side note: Sallie Mae launched a private credit partnership with KKR today. KKR expects to purchase a seed portfolio of private education loans followed by $2B in newly originated education loans annually for three years.

Any Black Sabbath fans? Enjoy.

"They say that life's a carousel
Spinning fast, you've got to ride it well
The world is full of kings and queens
Who blind your eyes and steal your dreams
It's Heaven and Hell, oh well
And they'll tell you black is really white
The moon is just the sun at night
And when you walk in golden halls
You get to keep the gold that falls"

-Sean

[Sean Collett] Indeed. Buffett called him that here. Twitter/X have not forgiven because they...

Sean Collett — 11/10/2025 7:42:44 PM

Indeed. Buffett called him that here.

Twitter/X have not forgiven because they never understood. Sell tweet came Jan 31st, 2023 and then what happened after? Regional banking crisis by March. March 15th, 2023 he tweeted about JP Morgan stepping in during the 1907 panic and by March 30th, 2023 he stated "I was wrong to say sell" because fed stepped in with BTFP. The sell tweet is taken out of context. If he did spell things out would that be better? Would anyone listen? Would he be responsible for causing market moves by direct statements? Likely why Warren Buffett would make vague statements about not understanding tech - easier to say that then deal with people acting directly on your words without understanding.

For those hungry to learn perhaps the nuggets are enough to figure out how to fish yourself instead of being given a fish. The rest never had any intention of learning anyway.

As for the depreciation discussion this whole thing made me think of a book I read and a story it told about Waste Management in early 90's:
"Founded by Wayne Huizenga and Dean Buntrock, Waste Management hauls trash in the
United States. Unfortunately, its financial statements were part of the garbage that it
should have transported to the landfill. The SEC accused the firm and its executives of
perpetrating accounting fraud from at least 1992 through 1997.
The creative accounting employed by Waste Management was quite simple, for
much of it dealt with depreciation and amortization charges. Elementary accounting students learn that straight-line depreciation equals cost minus salvage, all divided by the
life of the asset. To minimize the impact on the income statement, the bookkeeper can
increase the estimate of salvage value or increase the estimate of the asset life. Waste
Management did both, for example, by adding two to four years to the life of its trucks
and claiming up to $25,000 as salvage. Depreciation on other plant and equipment was
similarly contorted. In addition, Waste Management started booking ordinary losses as
“one-time” special charges. It also lied about the useful life of landfills by alleging that
the landfills would be expanded. A number of them were never expanded.
Waste Management cleaned up its act in 1999 by replacing the old management team
with a new one, by restructuring the board of directors and the audit committee, and by
supplanting Arthur Andersen with Ernst & Young. The after-tax effect of all the
shenanigans was a mere $2.9 billion!
Given the uncomplicated nature of these accounting games, did the auditors know
what was going on? If so, why did they not stop this fraud? If not, how diligently were
they conducting their audits of Waste Management? After all, $2.9 billion is a material
sum of money in anyone’s book"

Said later...."If earnings otherwise are
small this year, managers might lengthen the life of the equipment and increase the estimate of the salvage value. In this manner, depreciation expense is lowered and net
income is increased. Alternatively, if earnings are healthy during this fiscal period, managers could decrease the life of the asset and reduce the salvage value. Depreciation is
enlarged, but this protects the firm against the proverbial rainy day".

Not saying AI companies are the same as WM, but the game stretches earnings at a time when market is frothy. And when SBC is such a large component these stretches benefit insiders directly. In the end you have a bunch of companies trading real dollars with each other but the actual ROI in these dollars is not showing. Didn't BABA claim to just slash AI GPU use by ~80%? Meanwhile the CAPEX spend in US isn't slowing.

And market today is not same market Joel Greenblat was writing about in 2018 - it's on roids today. Shiller P/E is sitting at 40.3 right now. Good chunk of stocks in S&P are also below 50 & 200 SMA. So if market is being drive off AI hype and if big tech is playing accounting games to keep the booze flowing? And if $1.00 put into the market in 2021 created $5.00 in value, what happens if that reverse? Dr. Robert J. Shiller would disagree with you on a catalyst; he wrote in Irrational Exuberance that 1929 had none. Selling begets more selling. If AI companies are keeping market alive and earnings are overstated then doesn't take much to think the money flows create a suction outward where that 5:1 ratio because -5:-1 or worse given leverage use as covering becomes a real deal. Snowballs are easy to make when snow is abundant.

Market is smarter than before? Tale as old as time. New era! Dr. Robert Shiller wrote about that "Nevertheless, the new era thinking they promote is part of the process by which a boom may be sustained and amplified—part of the feedback mechanism that, as we have seen, can create speculative bubbles".

If so smart why issues in credit starting to bubble? Didn't someone do their due diligence? Didn't BDO audit First Brands right before they filed bankruptcy? Didn't BlockRock mark Renovo at PAR weeks before bankruptcy? Aren't smaller rating agencies being accused of selling ratings in the private credit space?

One has three strategies: go long, go short, sit on the sidelines. Each are valid and one does not need to throw money into the pit to speak on a subject.

Back to my topic of private credit. Utilities Exploring Private Credit in a Potential First. Lending standards so loose even utility companies are trying to borrow! "While the financing they offer is typically more expensive than the investment-grade debt available in the public capital markets, private lenders can usually provide off-balance sheet arrangements backed by individual assets that typically don’t hurt a borrower’s credit ratings." and "“Many utilities have huge investment plans and are going to be searching everywhere for the most cost-effective capital,” said Travis Miller, a utility analyst for Morningstar. “Many of the infrastructure projects utilities are developing are well-suited to credit-like capital, particularly those with contracted cash flows outside the traditional rate base model with large, high-investment-grade customers like data centers,” Miller said."

Contracted cash flows?!?!? Why that sounds like a quality lending candidate. Give them a few billion.

At the airport and on multiple delays so had time to write :)

-Sean

[Harshu Vyas] I take back some of my comments. Saw Burry's newest bio. Official X account fo...

Harshu Vyas — 11/10/2025 6:19:11 PM

I take back some of my comments. Saw Burry's newest bio.

Official X account for Michael J. Burry, M.D., dubbed "Cassandra" by Warren Buffett. Reactivated here after 2 1/2 years, something special coming Nov 25th

Didn't realise that Buffett called Burry "Cassandra." Thought it was self-proclaimed.

In a world full of people like Musk, Trump, Saylor and Ackman's it's way too easy to assume a person hasn't got the right intentions.

I have probably been harsh and unnecessarily sceptical questioning his character.

Still think Burry needs to be careful with his tweets for his own sake. Twitter is/will be brutal. It still hasn't forgiven him for that infamous "Sell" tweet.

[Harshu Vyas] Dr Burry doesn't need defending and you're right about his legacy. As for Cassan...

Harshu Vyas — 11/10/2025 4:46:17 PM

Dr Burry doesn't need defending and you're right about his legacy. As for Cassandra, my point is that everyone DOES believe what he says. Burry gets namedropped in UK newspapers, FinTV, FinTwit...

But my real issue comes with the way the tweets read.

Look at the mystery he's deliberately created around himself and the games he's playing by speaking in riddles.

Would Buffett ever behave like this?

Ironically, Burry's become the Musk of the investing world. He's creating a cult of devout followers. Intentional or not, it doesn't feel "right."

Deleting tweets, going AWOL, reappearing telling people to "stay tuned", claiming victory on Covid tweets... maybe it's the British in me but this seems like a guaranteed way to create hype in the short term only to destroy a reputation.

To me, it's predatory when you have this much influence to behave in this way. Again, I point to Buffett who is lowkey and thoughtful in everything he says. Sometimes "No comment" is best when you're this famous.

Furthermore, this comes across as worse because he's not saying anything that's unknown.

This is unlike 2022 "transitory" inflation or GME or the GFC where he really saw something everyone had missed. This seems more ... odd and off character.

And I'm getting worried because how many fools out there are now going to short Palantir because of Burry or short big tech. Fools aren't just on the long side and Burry's even implied he's not short anyway. But he's not been totally clear about that. He should be.

Ok, you can make the case if a person acts it's their stupidity. BUT if a person has influence/power it's on them to be clear and transparent with their words. Not talk in riddles. 1.5m followers... that's a lot of people. And talking in riddles only makes communication more likely to be misinterpreted.

As for "level of overvaluation" that's no longer good enough as a case to be bearish. There has to be a catalyst or something that slows down growth. Until you spot it there's a chance "level of overvaluation" could be realised in a few years if growth expectations live up.

"Level of overvaluation" has actually been true since 2018. Watch some of Joel Greenblatt's talks from then. He's been talking about market underperformance for ages. And he's been wrong for that long.

Yes, the correction will probably come - but unless you could outline a clear thesis for why, you just got lucky. It could be tomorrow or in ten years. But the value investing way - to me - is buy cheap companies regardless of general market sentiment.

Tesla is the prime example of "level of overvaluation". Sure, it's overvalued. But the valuation has held up. Would you short it? Or ignore it? If you ignore it, why even bother to comment on it?

And that is exactly my issue with Burry's comments. It's very different when we're two guys speaking in a quiet forum making it abundantly clear neither of us are short AI.

I just don't think one can definitively say AI is a bubble. And I think saying that is wrong without some catalyst to back it up.

Tbh, your case for a bear market is more convincing than Burry's so far. I enjoy reading your Bear! posts lol.

Hopefully, you see where I'm coming from. Still a Burry fan. But not a fan of this "twitter" version of him. Think he's better off going on podcasts and speaking naturally or writing substack articles if he wants to genuinely communicate with fans.

PS - I think investors have gotten smarter since '99 and markets have gotten more efficient as information flow has gotten better and now that AI can digest situations even quicker.

Also, the depreciation debate goes both ways - increase the useful life, decrease EBITDA. Is EBITDA less useful than earnings given that every company reports adjusted EBITDA? I think general the market just skips both and goes straight to cash flow.

[Sean Collett] Not that he needs me to defend but I am unsure why you are disappointed in the g...

Sean Collett — 11/10/2025 3:28:35 PM

Not that he needs me to defend but I am unsure why you are disappointed in the guy who called the 1999 dot-com and subsequent value revival, housing bubble, 2020 market bottom, GameStop, inflation, bond bear market, 2022 crash, regional banking situation & quick resolution, and then gold rally.

Your interpretation of Cassandra is incorrect. The mythology was Cassandra was a princess so she too had broad reach, but the curse was no one would believe her predictions.

As for analyzing cash flows and depreciation I find most don't actually understand. So I think you overestimate markets ability to read deeper.

Now Harshu, as we discussed the issue is not 1:1 dot-com fraud, but a level of overvaluation. Perhaps the issue is simply big tech overstates earnings through accounting games which benefit the shares they receive as SBC. Recall the paper the NBER released as a working paper in 2021 where they found $1 invested in the market created $5 of value. So let's say the AI CAPEX race slows down and earnings have already been juiced, we could in theory see a ramped up exodus of capital as most of these companies are ETF darlings.

Couple this with the margin leverage used to fund flows into these ETF's. FINRA margin use shows debt balances at $1,126,49.

As for your view on AMZN I suppose look at the price in 1999 and then 2001. I don't think Dr. Burry is predicting bankruptcy, but if you put money here and held you're looking at 2009 until you get to break-even. That's tied up capital for years. Opportunity cost is a real killer and I guess accounting would have saved you here :)

As for bear strategies I am long bonds. At some point I will look at PUTs on IWM specifically given leverage situations. Otherwise cash. Don't think I see value in big tech here :)

-Sean

[Harshu Vyas] Honestly, I think he's leant so far into this "Cassandra" fantasy that he believ...

Harshu Vyas — 11/10/2025 2:44:41 PM

Honestly, I think he's leant so far into this "Cassandra" fantasy that he believes he's an ostracised oracle. Except he has 1.5m followers and media churn out every tweet/SEC filing. Not really a Cassandra lol.

Always curious to hear what Dr Burry has to say but I'm getting disappointed. Maybe late November will be a surprise.

(FWIW, Jim Chanos has been complaining about big tech depreciation schedules for ages.)

But, to me, it doesn't matter because every Wall St analyst knows how to calculate FCF (which highlights the reality when capex outsizes D&A consistently).

The point is AI's a narrative thing. Wall St are seeing these large capital outlays and are applying huge IRRs to them for these big tech companies. Rightly or wrongly. But it's way too difficult for a layman to figure it out.

The real risk is that all capex is a waste of money and the tech becomes obsolete fast - depending on what you read/who you speak to, you'll find a different answer.

But - just like gambling - big tech is only one big breakthrough away from AI being a narrative to something real and game-changing. Like biotech on steroids, maybe.

Unlike biotech, big tech have the balance sheet flexibility and insane cash flow generation to keep investing until they hit treasure or even just turn off the taps and move on at any point. Maybe the "circular" dealings make stopping difficult but everyone cries about how it's fishy ... I think it makes big tech more powerful.

Big tech currently believes that AI spend is necessary for their survival. Wall St think it'll make them more valuable. And then contrarians think AI's a bubble. Based on all of that, I'm slowly becoming more bullish on big tech. Until govt starts to regulate/break it up, these companies will only become more powerful.

Burry's wrong. So far. The accounting is not where you look. Just like AMZN in the nineties/noughties, profitability was the wrong metric to track.

[Sean Collett] Back to AI. Our Emcee posted today: [graphic] Of course if we look at our frien...

Sean Collett — 11/10/2025 1:43:30 PM

Back to AI. Our Emcee posted today:

Of course if we look at our friends he has listed this is a financial reality. For example ORCL:

Then GOOG:

AMZN:

META:

MSFT:

I suppose not the same as the dot-com as we all discussed, but it is a different flavor.

You know what I find interesting that ORCL had recently reported ~($394M) FCF but if you factor SBC into the model then it was ~($5,068M). SBC is 22% of CFA.

Front door buybacks taking place here too.

Again, not sure I would 1:1 equate this to what happened in the dot-com, but there is some funny accounting taking place. The longer the party lasts the more those who are inside benefit.

Curious what our Emcee has to say of November 25th. DELL reports on that day.

-Sean

[Sean Collett] Headline this morning - BlackRock Faces 100% Loss on Private Loan, Adding to Cr...

Sean Collett — 11/10/2025 10:19:41 AM

Headline this morning - BlackRock Faces 100% Loss on Private Loan, Adding to Credit Market Pain

"About a month ago, BlackRock Inc. deemed the private debt it had extended to Renovo Home Partners, a struggling home improvement company, to be worth 100 cents on the dollar. As of last week, the firm had a new assessment: zero."

This is the crux of the issue "while the Renovo debt represents a sliver of total assets for the three lenders, its sudden collapse strikes at the heart of what critics see as a major vulnerability in the private credit market: the disconnect between the valuation of illiquid loans and the performance of the underlying companies.". When it starts to fall apart it starts fast and there's no telling where the zombies are because of the layers of lending and weak standards.

$150M here via Renovo and $500M there with HPS and that's just $650M written off credit books in a few weeks. What other surprises does the credit market have for us? Just a few weeks ago the Renovo debt was being marked as PAR!

I find it interesting that KKR (PE & credit) has a stake in the fund Marshall Wace and in December 2024 Marshall Wace gave $1B to Richard Northridge for Eureka hedge fund. The money lent out into speculation sure is interesting.

“There's no earthly way of knowing
Which direction we are going
There's no knowing where we're rowing
Or which way the river's flowing
Is it raining, is it snowing?
Is a hurricane a-blowing? - uh!
Not a speck of light is showing
So the danger must be growing
Are the fires of Hell a-glowing?
Is the grisly reaper mowing?
Yes! The danger must be growing
For the rowers keep on rowing
And they're certainly not showing
Any signs that they are slowing!
A-aa-aaa-aaaah!” - Roald Dahl

-Sean

[Sean Collett] Interesting article. Deutsche Bank explores hedges for data centre exposure as ...

Sean Collett — 11/5/2025 5:34:06 PM

Interesting article. Deutsche Bank explores hedges for data centre exposure as AI lending booms.

"Deutsche Bank is exploring ways to hedge its exposure to data centres after extending billions of dollars in debt to the sector to keep up with demand for artificial intelligence and cloud computing.

Executives inside the bank have discussed ways to manage its exposure to the booming industry as so-called hyperscalers pour hundreds of billions of dollars into building infrastructure for their AI needs that is increasingly funded by debt.

The German lender is looking at options including shorting a basket of AI-related stocks that would help mitigate downside risk by betting against companies in the sector. It is also considering buying default protection on some of the debt using derivatives through a transaction known as synthetic risk transfer (SRT)."

If Deutsche is talking about hedging then likely some caution should be applied. Lot of money being poured into these assets that will depreciate fast. Throw in maintenance CAPEX spending. These companies need large revenue growth to sustain the investment.

Interesting too is OpenAI CFO Sarah Friar is asking for federal backstop to allow financing to happen. Deutsche hedging and OpenAI wanting government backstops. All bullish! (sarcasm)

Pivoting to that private credit topic I keep mentioning, TCW Groups CEO Katie Koch is apparently worried about cracks in private credit. $1.7T industry and nowhere near the regulation or DD that falls into traditional lending. I can only imagine the sins that will be coming to light soon enough. Koch said "the reality of that is, there's been a race to the bottom in terms of the covenants that are provided, the coupons that are earned".

UBS Colm Kelleher stated that issuers are shopping ratings from smaller agencies:
“We’re beginning to see huge rating agency arbitrage in the insurance business,” Chairman Colm Kelleher told his fellow financiers at Hong Kong Monetary Authority’s Global Financial Leaders’ Investment Summit on Tuesday. “In 2007, subprime was all about rating agency arbitrage. What you see now is a massive growth in small rating agencies ticking the box for compliance of investment,” he said."

U.S. life insurers have added private credit to their allocations over the years and according to this article. Marc Rowan stated though that Athene Holding LTD (Apollo ticker $APO) mostly used big three credit ratings to asses it's assets. Ratings agencies are usually ahead of the curve......right? Right?

Isn't it interesting that the fifth larges auditing firm, BDO, gave First Brands a healthy review before they blew up? WSJ reported "documents that have emerged following First Brands’ collapse show substantial discrepancies between the financial information that BDO USA validated and the financial picture that is now coming into focus".

Australian Securities and Investments Commission chairman Joe Longo is stating that in AUS private credit is on verge of a "Minsky Moment". Only a problem for Australia though, right? Right?

Mike Kelly wrote at Barron's that "the doomsayers see rapid growth and cry “bubble.” They are wrong. Private credit isn’t a bubble—it is a response to regulatory change, market concentration, and the real capital needs of private enterprise. Private credit marks a structural reshaping of American finance, making credit more accessible, more tailored, and more resilient". Since Barron's said so, I think you know what that means. We can hand wave risk away because private credit is reshaping American finance!

Few days ago it was reported Shutterfly was in talks for a $2B private credit deal with General Atlantic to help as they have 84% of their $2.5B debt due between 2026-2027. Moodys has current debt rated at lowest levels of junk with Caa2. Shutterfly did an LME in 2023 and now tapping the private capital markets for $2B.

BlackRock acquired HPS Investment Partners for $12B this year only to find out a company HPS lent money to, Broadband Telecom and Bridgevoice, allegedly committed fraud. $500M of private capital HPS lent was backed by collateral that didn't exist and was supported by emails with fake domains and forged signatures. There was a specific email domain investigators traced and found that for two years every email & invoice sent was fake.

First Brands is now being accused of fraud via fake numbers and questionable collateral plus some off-balance sheet items.

Between AI complexity and private credit I think of this quote - "one of the hallmarks of mania is the rapid rise in complexity and the rates of fraud" - Dr. Michael J. Burry

Perhaps our Emcee, Cassandra, will touch on the subject at some point now that he's returned. What say you, Obi-Wan?

-Sean

[Sean Collett] I do think AI is a bubble, but I also agree with you in that it's not entirely t...

Sean Collett — 11/4/2025 1:53:59 PM

I do think AI is a bubble, but I also agree with you in that it's not entirely the same thing as the dot-com. I also have no skin in the game so I watch from the outside on this one.

I will say hearing $MSFT CEO Satya Nadella say they are sitting on a ton of unused $NVDA chips because they can't actually get access to power to run them is a major tell. CAPEX spend has been insane and now we have these companies starting to tell us they have bought inventory of stuff they can't actually use, which will age fast, and their obstacle isn't one solved fast either. They're now up against power access and then government regulation to build more plants. What does this mean for stocks like $NVDA, $TSM, $AMD and even further up the chain like $SMCI? Growth will be slowing that's for sure.

<<telco companies were saddled with debt through acquisition-led growth. I don't see AI as this extreme.>>
To be fair though, Google just racked up $25B in debt ranging from 2-50 years of maturity to fund AI investment. The 50-year crap yields 1.07% more than US treasuries LOLOLOLOL

I think the real trouble is going to come when the AI CAPEX spend naturally slows and drags $NVDA revenue down fast. For the data center builders the maintenance CAPEX for these companies will start to eat into FCF and my guess is the ROI on these will never produce the dollars invested. The other big challenge will be if/when a recession does occur and advertising spend slows this will pull the revenue down from $META or $GOOG which will also squeeze things.

Like I said to you on November 1st "AI is more just a bunch of big companies trading dollars between themselves, but they are real dollars. It will slow at some point and drag equities down eventually but the real action is happening elsewhere IMO." - I could be wrong as I see private credit as a broader impact to the economy as AI will be contained to an extent. It will drag down that top of the "K" economy though.

MIT had that study that 95% of enterprise projects fail to deliver an ROI. I have used AI and the amount of correcting I have to do is insane for something that is sold as this major innovative and lifechanging solution. I feed it PDF documents, XLSX files, and various other things and the times I have caught the AI not even opening the document then "hallucinating" the answer is terrible. If I didn't know the answer before I tried to use it I would likely be fooled by the misinformation. Imagine what's happening out there.

<<Think your private credit loans example is another example of something to be wary of. But hidden. I wonder if there's a way to actually lift the hood and find out what's going on.>>
This is what makes private credit so fun. So little transparency into the deals, but when they start bubbling it will be felt everywhere. First Brands again is our canary.

-Sean

[Harshu Vyas] Sounds stupid but I think AI isn't really the bubble here. (Quantum is very bubb...

Harshu Vyas — 11/4/2025 1:28:14 PM

Sounds stupid but I think AI isn't really the bubble here. (Quantum is very bubble-y, though.)

Salesforce traded at 8x revenues, 120x fwd earnings in 2014. ( The Art of Value Investing | John Heins & Whitney Tilson | Talks at Google - 23 mins in.)

Did investors get "killed"? No. It was real. And multiples did compress to 6.3x sales, 20x fwd earnings today. But investors were still left with a result. Maybe not "market-beating" but to keep pace with the market is pretty damn good imo.

Luckily, it doesn't really affect my portfolio that much. Just mental gymnastics with no skin in the game.

It's just too hard to "sense" a bubble and that's why when everyone calls it a bubble, I get sceptical.

"Circular" economies, high capex etc.- it's nothing "ground-breaking." It's nothing "unseen."

Slightly disappointed by Dr Burry's bear case thus far in that it's not unique. We'll see, though. (Never write off Burry, though.) But it's lazy to compare this to dotcom - telco companies were saddled with debt through acquisition-led growth. I don't see AI as this extreme. If anything, circular lending means they have to work together. So issues will be even harder to notice.

My real issue has been, and continues to be, "staple" stocks like Costco and FICO that trade at ludicrous premiums. WMT P/E used to be sub-20x (2000s and 2010s). Now close to 40x.

Worse, is the consumer tech companies that now trade at 2021 levels despite much higher rates.

That assumes growth assumptions are higher than they were 5 years ago since the discount rate has increased so dramatically. That's crazy to me - DASH, SPOT, NFLX, CVNA... where exactly has the growth come from? It's not growth but pricing and cost-cutting (R&D). Any weakness in consumer spend and their valuations are finished.

The market values "repeatable"/"recurring" revenues but it's so easy to switch off. Consumers changing habits, to me, is the big paradigm shift that will eventually happen. It takes so long because it's hard to cut back on holidays, new iPhones, streaming services, dining out.. all at once but difficult choices will be made. And none of the above are priorities.

Think your private credit loans example is another example of something to be wary of. But hidden. I wonder if there's a way to actually lift the hood and find out what's going on.

I think I agree with your cash strategy. And would probably action it if I were American. It's nowhere near clear enough to take a direction on the overall market. But the UK stocks feel so much more reasonable. (Granted, there's less story-telling/growth-y companies lol!)

Say tuned for next week when I'll inevitably change my mind and go back on everything I thought :)

[Sean Collett] As QT gets ready to end in December I find it interesting that of the 502 ticke...

Sean Collett — 11/4/2025 11:19:37 AM

As QT gets ready to end in December I find it interesting that of the 502 tickers that makeup the S&P 500 that 308 (61%) are below the 50 SMA and 235 are below the 200 SMA.

SOFR shot down to 4.04% after FOMC and now back on the rise with option adjusted B/CCC spreads too. Cost of borrowing going up.

I went back in this morning on my TLT calls as I see some stability after FOMC. Got out in time and will see if this is a spot to reenter. I see a play here similar to what I saw in 2021/2022 except in reverse. Fed made transitory mistakes prior and likely making them again this time. Otherwise I am sitting in high cash. There is no clear catalyst for anything but if market was frothy last year it's not worth the chase now.

Like I said in September, "not a call to go shorting/putting, but a call to manage your risk. Cash is a strategy too." I am taking the major cash strategy for now. My new TLT calls are Aug 2026 expiration and got in at $0.80 a contact. I run tight on my options strategies so if I don't like what I see I bolt, but I see a pitch here.

Speaking of pitches, I read on PitchBook.com that roughly 30% of private credit loans with a PIK component are coming due in next two years. Oh my. Estimated that $170B of capital is going to be needed in this time. Bloomberg ran a story a few days ago that to cover the fact that these loans are turning bad they have resorted to using bad PIK to hide and kick the can.

Our Emcee was blasted this morning because of his newly reported PUT position (which may or may not even still be on the table). I think when you see a company CEO publicly call this stuff out it's a toppy sign. What do I know. Interview was something.....

I think of the below poem at times like these.
“There's no earthly way of knowing
Which direction we are going
There's no knowing where we're rowing
Or which way the river's flowing
Is it raining, is it snowing?
Is a hurricane a-blowing? - uh!
Not a speck of light is showing
So the danger must be growing
Are the fires of Hell a-glowing?
Is the grisly reaper mowing?
Yes! The danger must be growing
For the rowers keep on rowing
And they're certainly not showing
Any signs that they are slowing!
A-aa-aaa-aaaah!”
? Roald Dahl

-Sean

[Sean Collett] You can go back to 1995-1999 and see folks writing about the equity bubble. Diff...

Sean Collett — 11/1/2025 5:49:59 PM

You can go back to 1995-1999 and see folks writing about the equity bubble. Difference today is the wide access to social media so seems more in your face. Even if everyone can see the outcome, human nature is human nature and most just can't help themselves.

I think of this writing from Harry Schultz:
“Some readers may not know that for hundreds of years people have been saying, at certain levels of the business cycle, that they were in a “new era of permanent prosperity.” Even in ancient Rome, they were under the impression they had fixed a state of affairs – an affluent society – as master of the world. The more things change, the more they remain the same. No matter what a legislature does, no matter what a president says, no matter what new concepts are around, the cycles of up and down take their toll – be it in stock markets, cattle prices, gold values, or whatever.”

We will see where this ends, but I suspect the bodies this time are buried in the private equity/credit yard. Nothing like lending money with loose or minimal covenants to lenders that have little to no MOAT and probably don't generate any cash and just need more infusion to keep running. Folks trying to allow PE/PC in their retirement accounts.....

AI is a bubble but I think the real damage is happening at your local hospital, plumber, or anywhere else that PE has rooted inside. First Brands was a canary. AI is more just a bunch of big companies trading dollars between themselves, but they are real dollars. It will slow at some point and drag equities down eventually but the real action is happening elsewhere IMO.

Private credit is going so well that debt holders are swapping their debt for equity. This is usually where the fun begins.

-Sean

[Harshu Vyas] The Gambling Epidemic - this came up on my YT feed. He's right. We're slightly s...

Harshu Vyas — 10/30/2025 4:43:46 PM

The Gambling Epidemic - this came up on my YT feed. He's right. We're slightly screwed, for lack of a better word.

Perspective is getting difficult in these times but I don't see how this doesn't end in disaster.

At the same time, is this the most well documented/predicted crash ever?

The Times (UK mainstream newspaper) alone has so many "doomer" articles (see image below).

And then there's also the people around me. Remember I'm 21. I'm meant to be dumb and reckless. So are my friends. But, well, we're all cautious:

My two friends who studied computer science at uni both called AI a bubble, whilst applying to the AI firms for work. Another friend who works at a tech/AI recruitment consultancy firm reckons he'll be out of a job in two years since clients are behaving so recklessly. My friend's older brother who runs a tech startup says VC firms are sitting on more cash than they know what to do with. My uncle told me his pub friends reckon we're heading for a stock market crash.

None of these people have any "right" to call it a bubble. They're averagely smart in the financial space and certainly wouldn't know how to read a balance sheet. But common sense just isn't prevailing.

Have we really got this stupid? I reckon the world knows it too, but keeps playing cos everyone's making money. No-one believes in AI generating real cash returns. They're relying on the greater fool theory. But eventually there will be a limit.

Otoh, if AI does make real breakthroughs perhaps they'll look like geniuses which will bring about FOMO from the more watchful lot resulting in more speculative mania...

Who knows how this ends lol?

But I do expect a big crash in the next few years. Bigger than dotcom. Truly insane times.

And the macro I haven't even touched - tariff threats, geopolitical tensions, corporate debt maturities in '26, private credit, consumer sentiment decline (see Kraft Heinz) ... - maybe these all work out.
Macro always looks rubbish. I remember late 2022/early 23. It looked bleak then.

[S. maltophilia] Not sure I agree UST is losing status That's what we'll find out. There's been...

S. maltophilia — 10/29/2025 4:24:02 PM

Not sure I agree UST is losing status

That's what we'll find out. There's been too much noise about paying off long paper in crypto or extending maturities in the past (somebody must've told the head creditor to shut up recently) that many lenders are/will be having doubts about lending at 4.5% for thirty years.

As for alternatives, shorter duration, Euros, some combination of EM debt. Of course, if you're an insurance company matching maturities to actuarial payouts, long-dated paper is fine. You don't care if grieving widow finds her million dollar settlement buys a cup of coffee.

[Sean Collett] Not sure I agree UST is losing status even with the deficit. What's the alternat...

Sean Collett — 10/29/2025 3:54:55 PM

Not sure I agree UST is losing status even with the deficit. What's the alternative?

My manual stop triggered though so process discipline kicked in and closed my position. Will keep myself ready but the run triggered and thus must respect what I see :(

This one-sided economy is not sustainable.

-Sean

[S. maltophilia] Agreed short rates will come down. The Fed can make them. But I see a steepening...

S. maltophilia — 10/29/2025 2:25:04 PM

Agreed short rates will come down. The Fed can make them. But I see a steepening yield curve, especially on the long end. YCC is a tool only the the most solid creditor can use, and UST is rapidly losing that status.

[Sean Collett] I think rates are coming down and by natural relation all yields will fall. I se...

Sean Collett — 10/29/2025 1:57:48 PM

I think rates are coming down and by natural relation all yields will fall. I see opportunity here with TLT and thus where I have my money today. If I am wrong I of course take the L and move on but have enough time to see where the chips fall.

QT basically ended a bit ago and the final remains will be halted.

Perhaps inflation is an issue still, but I challenge I see more downside risk in the nearer term than I do runaway inflation. The US money supply was in a contraction for 15 months and was flat about four months outside of that given us a total of 19 months - there is a lag effect that I believe is not taken into consideration. Current money supply has not even cracked a YoY above 5% and some economists see the fed needing 6-7% growth to support the 2% inflation target. So we had a flat/contraction for 19 months and then since June 2024 we have been between 1.3-4.8% growth which is below what's needed.

Tariffs are indeed nothing more than a tax and while the price level has gone up it's not the inflation that matters. It's moving money from your pocket into the governments - no new money is created here. As it stands the fed has held on because tariffs have changed the price level but the tightening effect is real.

2024-2025 business chapter 11 filings are highest since 2014 and this is in a world of LME's. Chapter 7 filings are on par now with 2020. AMZN cutting 14K, UPS cutting 48K, Paramount with 2K, TGT with 1.8K, Nestle with 16K, Lufthansa with 4K, GM with 1.2K. You have SNAP benefits ending Nov 1st. I am not seeing the upside risk to inflation on the demand side that existed in 2020/2021.

If long yields were to ever go wild they would move to likely cap them IMO. I see a similar playbook forming as what US treasury and fed used in 1942-1951 where they ran YCC. My longer speculation is they will push yields down and then term the debt out and then eventually let inflation rise to burn the value of the debt. This is how the US took DEBT/GDP from 121.7% in 1946 to 34.7% by 1975. There are some key differences in 2025/2026, but the game ends one way and I see this being a first pass option.

We shall see.

-Sean

EDIT: Fed just cut 25 bps and QT ends December 1st.

[S. maltophilia] How about SHY or BIL as an alternative? Long yields will likely go up when the ...

S. maltophilia — 10/20/2025 2:25:00 PM

How about SHY or BIL as an alternative? Long yields will likely go up when the rest of the world - and anyone managing assets responsibly - realize that aggressive rate cutting in a reasonably strong economic environment and strong inflation is, for want of a better term, stupid. I can't see anyone lending these clowns at 3.5% for 30 years. Either a default the easy way (inflation), or the hard way.

etf.com

finance.yahoo.com

Not nearly as liquid, but very low implied volatility.

[Sean Collett] Hello Bears, As of last week I sized into a full position for $TLT in anticipat...

Sean Collett — 10/20/2025 9:30:54 AM

Hello Bears,

As of last week I sized into a full position for $TLT in anticipation of aggressive rate cuts coming from the fed. Long calls into late 2026/early 2027 to give myself time to see where things will go.

In late 2021 I had bought puts on $TLT when inflation was "transitory" and saw all the takes on how I was wrong - $TLT went from $145-150/s down to where we have been around.

We're at a stage where the cutting cycle has already begun and new fed chair in May will likely support a lower rate. Economy already looks fragile and folks talking of this K-shaped recovery as if that means things will be fine. The economy needs that bottom part of the K to function so spending into AI isn't going to offset the declines.

Possible deficit will become a bigger focus so that's the risk to the investment going south, but I find the natural relationship will take place over this time and as rates go down and economy slows with it then the 30Y yield will decline as well.

Current 30Y yield is 4.5780% and I expect if the yield declines to ~3.5% that will bring $TLT to $107.08-107.45.

Happy investing,
Sean

[Sean Collett] Hi all, I feel my inner bear trying to come out of hibernation. There is just s...

Sean Collett — 9/5/2025 9:17:36 AM

Hi all,

I feel my inner bear trying to come out of hibernation. There is just some pure silliness taking place. Shiller P/E is now 39.05 and up from the 38.51 I posted August 11th and it's now higher than the COVID high. It has not been this high since the dot com.

FINRA reports margin usage is through highs as well. If we compare debt balances to ave SPY ETF price well.....

I closed my AEO position yesterday after it went up +50% in a short holding period. The rest of my port is also looking pretty well. I was fully invested and will now start trimming back. Since I am not a buy and hold investor, I feel comfortable missing some pop's because there will always be opportunity. This froth is just getting to be too thick for me now to ignore.

Money has just become meaningless it seems. I still think about the UFC deal that Paramount made. $7.7B for this.

Retail loading on margin to buy equities because they can only go up. Bitcoin in your 401K, can't buy groceries at the store with it BUT you can load up on bitcoin ETF's and the value prop is "the $ is trash and US has too much debt, buy Bitcoin". Silly. Just silly.

With the margin use where it is, it's easy to see where covering comes into play. Selling begets more selling. A rapid move could easily snowball from these heights and at this point a catalyst could be anything.

Yield on the S&P 500 is 3.31% using a reported P/E of 30.16, while the 10Y sits above 4%. What did Graham say?

Not a call to go shorting/putting, but a call to manage your risk. Cash is a strategy too. Sep-Oct are historically interesting months.

Ol' Joe has seen his shoeshine!

Happy investing,
Sean

[Sean Collett] <
Sean Collett — 8/19/2025 2:40:12 PM
<<AI is going to take our jobs, but then the recent LLM progress seems to be stalling.>>

On the topic of bears I find myself fascinated by the AI moves. It was just yesterday META was rebranding to pivot their company into the Metaverse only to quickly abandon that and move into AI. They were paying large sums of money (rumored $100M bonuses) to poach engineers from OpenAI.

Now?

Makes one think about the NVDA, SMCI, META, and various other companies that potentially are at risk. At some point the inflow of capital will indeed slow.

My strategy right now is to hold into value picks. It would seem if this does pop we may have a dot com style rotation into value.

How is everyone else looking at the market currently?

Happy investing,

Sean

[Sean Collett] I have tried to curb my natural bearishness as I have clearly been wrong...or ea...

Sean Collett — 8/11/2025 11:36:44 PM

I have tried to curb my natural bearishness as I have clearly been wrong...or early (but still wrong regardless). I have been long but conservative. Market is in just a rather frothy state that I can't help but question where it goes. Shiller P/E is sitting at 38.37 which is the highest November 2021 when it hit 38.51. S&P P/S 3.22 which is just highest since well at least 2000.

Bitcoin for your 401K! What a time. Throw in an NFT for the kids college.

I am fully invested at the moment holding things like OXY, GNK, GOOGL, DECK, QVCD, VET, AEO, and GTN (I am a degenerate and bought some recently after exiting last year). That said I am looking at what's next and I just am feeling off about where things are.

The news today that really got me was the new UFC deal. $7.7B for Paramount to stream UFC events. In 2018 UFC and ESPN reached a deal for $1.5B and now Parmount got the US rights for $7.7B. Looking at Yahoo! the market cap for PSKY is $6.41B so...............................this UFC deal is greater than the MC of the company or 40% of the enterprise value. Does Paramount get $2 back for every $1 of this deal? $10:$1? Or is it ($2):$1 or ($10):$1? Who cares, pop the corks! 12.67% of the float short though so keep an eye for some up/down action.

AI is going to take our jobs, but then the recent LLM progress seems to be stalling.

Anyone have any "bearish" strategies they're looking at right now? I do think there is some distressed debt opportunity forming (why my QVCD hold). Corporate bankruptcies are on the rise with chapter 11 (grey) highest since 2013 and chapter 7 (blue) highest since 2020. This is missing all the LME's that are taking place too which are on the rise.

Happy investing,

Sean

[Sean Collett] RE: Crypto It only took a bit over a year but the U.S. Treasury's new plan is t...

Sean Collett — 6/17/2025 2:30:01 PM

RE: Crypto

It only took a bit over a year but the U.S. Treasury's new plan is to back stablecoins. It will "drive demand from private sector for US Treasuries, which back stablecoins".

The signs were there when we discussed this, of course I am a bit surprised how deep it has gone. Coinbase just sponsored the recent military parade.

So I stand by my original thesis that it will not go to zero.

-Sean

[Harshu Vyas] Wow. SMCI auditor E&Y resigns. The shorts were right. Stock down 30+% in the pre...

Harshu Vyas — 10/30/2024 9:25:06 AM

Wow. SMCI auditor E&Y resigns. The shorts were right. Stock down 30+% in the pre-market.

[Harshu Vyas] Lmao. Thought I'd just share this because it made me scoff. MSTR isn’t overval...

Harshu Vyas — 10/20/2024 5:15:05 PM

Lmao. Thought I'd just share this because it made me scoff.

MSTR isn’t overvalued : r/MSTR

The stupidity, the delusion, the greed -- and they're all so convinced in such a flawed method.

Michael Saylor and all of the other insiders haven't been dumping for no reason!

[Harshu Vyas] AI woes... who'd've thought? McDonalds removes AI drive-throughs after orde...

Harshu Vyas — 6/18/2024 11:25:23 AM

AI woes... who'd've thought? McDonalds removes AI drive-throughs after order errors - BBC News

[Harshu Vyas] I'm out of US equities as of last week. Own only UK-based stocks. Fear has reall...

Harshu Vyas — 6/2/2024 7:37:39 AM

I'm out of US equities as of last week. Own only UK-based stocks. Fear has really gotten a hold of me now. There are still cheap US stocks, but there are even cheaper UK equities - and it seems certain "left for dead" UK companies are beneficiaries of inflationary pressures! Makes making the jump easy.

To be clear, I'm not a hardcore "bear." I don't have any desire to short the market or try to time the market to my favour.

Truthfully, I have no idea how long this lasts, but it does seem momentum is slowing. Companies like CRM, META etc are proof of that. A 40% drawdown from here in the S&P 500 wouldn't shock me at all. But, as I reiterate, I have no position and talk is cheap.

The economy rarely plays into my thought process, but I do fear an inflationary resurgence in the back-end of this year. I suspect the UK Conservative Party think a similar way - else, why would they hold an election in the middle of the summer when they're already so far behind in the polls? (Answer - damage limitation.)

[Harshu Vyas] Are we in 2021 again? GME up 50+% because a certain Roaring Kitty returns on X. ...

Harshu Vyas — 5/13/2024 10:04:23 AM

Are we in 2021 again? GME up 50+% because a certain Roaring Kitty returns on X. Now up 200% in the last month and 100% in the last five days. We're so f*cked lol. At least we know we're in the good times. Does the air smell sweeter, the grass look greener...?

Is this what '99 felt like? Or is this stupider? Still reckon markets reach fresh ATHs but how much more steam can this market possibly have?

EDITED - 10 minutes later, it's now gone from 50% to 90%... wow!

[Sean Collett] Annnnnnddddd fed announced they will slow pace of QT from $60B to $25B in June -...

Sean Collett — 5/1/2024 2:26:12 PM

Annnnnnddddd fed announced they will slow pace of QT from $60B to $25B in June - which is in effect cutting rates. Mentioned the end of QT back in November too.

-Sean

[Sean Collett] So did you miss the comment I made about debt being termed out and at fixed rate...

Sean Collett — 5/1/2024 1:51:39 PM

So did you miss the comment I made about debt being termed out and at fixed rates? Refinancing is a risk if my maturities are due tomorrow not in 10 years. You're only going to need to refinance current debt if it's due otherwise that risk isn't present. This is where knowing what you're buying comes into play. If my debt is termed out and at fixed rates that's different than a company that has a lot of short-term maturities with low fixed rates and/or floating rates.

What's the cash situation like? What's the MOAT of the company and will revenues hold in a "lipstick effect" in a downturn? Either way you wrote a lot but there's a lot of nuance in this that can't be written off as "all leverage is bad". Will companies go bust? Yes sir. Will all leveraged companies go bust? Nope.

You can also consider companies that have debt issued when rates were low and can take advantage of the fact that their bonds have likely tanked. If they have strong balance sheets they can use some of their cash/assets to buy that debt back at a significant discount.

Apple has $108B in debt so do we bucket them the same? Likely not. They have enough cash to nuke their debt in the event they need to. Not to mention they have $43B in property and equipment to sell too. Just using them as a quick example of where you need to look deeper and all leveraged companies are not equal.

Boil it down without this getting into some big thing is writing all leveraged companies off isn't going to make you money. Look everywhere because there's usually opportunity in places the market has decided to look away from.

<< Further, in 2022, companies had the ability to pass on costs because consumers were strong. Two years later, is the situation the same?>>

Right. Same thing I wrote to you on this thread. Either way there's a lot that goes into this and the money is made by those that look everywhere and sometimes even in leverage there's opportunity if you're willing to look. Not all debt is equal :)

<< I just don't see how small caps/micro caps can get hit more when they're already so cheap.>>

Makes me think of what Peter Lynch said in 1994 when thinking of how much lower can something go. The answer is much lower!

-Sean

[Harshu Vyas] Disagree with you about the debt. Many companies have shifted from a going conce...

Harshu Vyas — 5/1/2024 12:22:23 PM

Disagree with you about the debt. Many companies have shifted from a going concern to a "writing's on the wall." Corporate restructuring has become so desensitized by the market but think about what it actually means. These things take time and time always catches up.

WBD is just an example. NCLH today, too. Tomorrow it'll be someone else.
Companies with debt are clearly more volatile because the market realises that earnings have to be much stronger than historically. Companies are running out of time to dilly-dally and debt on the balance sheet will swallow them alive. Even management schmooze is just not working anymore.

When refinancing inevitably occurs, higher interest rates will increase these businesses costs of capital dramatically. If you're a junk bond company and you're accustomed to borrowing at 4.5% and borrowers suddenly want 8.5%... and that's today! You can't really go to the equity markets, either, showing off a vastly imbalanced capital stack.

What if inflation picks up or rates go up again? Everyone knocks on J Powell but I think he's smarter than recent years have shown him to be. He'll increase rates the moment inflation resurges. And inflation has already shown its persistence. It isn't going anywhere. So rate cuts are off the table. Further, in 2022, companies had the ability to pass on costs because consumers were strong. Two years later, is the situation the same?

Maybe the worst is many years out, but it's the opposite of the last 40 years where borrowers could keep refinancing at lower rates. How can you be bullish? What was a tailwind has become a death knell. Unless the debt is backed against something real (i.e certain commodities, certain RE, patents...).

Furthermore, what if junk bond companies begin to struggle to throw off the necessary cash flows resulting in borrowers being more harsh? That's a contagion effect and if everyone shuns lending to bloated empires, they'll all crumble. It's happened in the past. It'd be presumptuous to think that emotions can't go from euphoria to depression in a snap. Too many zombie companies and something has to give. This market's been too nice for too long. An older person told me about the time (not so long ago) he had a 17% mortgage. And people are throwing toys out of the pram at 5%!

Further, higher interest payments = lower returns for equity holders. Shareholders ought to remember exactly where they lie in hierarchy - management owe us nothing! Companies will quickly cut dividends, stop buybacks as earnings fall off to preserve cash. Makes little sense to buy the stocks unless you're sure that cash flows AND earnings will be consistently higher than interest payments. Minimum 2x interest coverage, imo. Any less and you're asking for trouble.

Either way we must remember what Graham once wrote in that in any sell-off that value will be punished just as much as any other stock so debt or no debt there could be trouble.

I want to say "this time is different" but maybe I've got it wrong. I haven't got enough experience to say what may/may not occur here. I just don't see how small caps/micro caps can get hit more when they're already so cheap.

[Sean Collett] IMO debt isn't so much a concern if there is enough cash to satisfy the interest...

Sean Collett — 5/1/2024 10:57:49 AM

IMO debt isn't so much a concern if there is enough cash to satisfy the interest payments and if it's fixed rate & termed out. It's not ideal by any means but it's not the end of those companies. Either way we must remember what Graham once wrote in that in any sell-off that value will be punished just as much as any other stock so debt or no debt there could be trouble.

As for WBD it is likely a mix of a many things. Streaming is proving to NOT be the killer many thought it was and is quickly turning into cable 2.0. Like I wrote on the value thread months ago they're now stuck between being content creators and content distributors which means they're always going to be big spenders to keep up. Throw in challenges like FUBO dropping WBD due to license pricing and that shows it's a tough market to compete in. And for termed out debt, WBD has $13.6B due in the next five years which does make their debt a concern given they will also need to keep spending to stay competitive. What happens if consumers finally do start to cut back? Some of these streamers with stagnant content will get cut and with WBD licensing content already to platforms like Netflix it doesn't look too good here.

I did buy some calls on TLT to dip my toes into bonds as I think there may be some rush back into "safety". Risk here is inflation but I am more banking on the "old" mindset rushing in and TLT benefiting in the interim. $100 calls are dirt cheap so risk/reward is there and I keep tight stops. This is a short term game for me here.

Chicago PMI below 40 which raises some problems and is setting up a real stagflation situation. I personally don't expect another hike (too much political pressure) and more so if the fed starts to follow through with slowing QT which is in effect a rate cut. Will be critical to see what their messaging is here though.

Cash is safer though like I said and not losing money is the goal.

-Sean