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ORCLOracleOracle Abridged - Capital Cycle IQ & Forensic Files on the Big 5 Hyperscalers (MSFT, AMZN, ORCL, META, GOOG)
[I trimmed and restated the 9200 word original article down to about 1750 words for this Abridged version. This version contains slightly different, more directly stated prose and retains some of the visuals. An Abridged version accompanies every major feature article but is no substitute. The Abridged version is provided at the request of a significant portion of readership. I hope this version is clear for those that requested it. I will say in cutting 4 of every 5 words, most of the personality and some arguments are necessarily missing. As a result, I highly recommend reading the main article when one has the time to do so. Thank you!] Where are we in the capital cycle ? The blue bars below represent the percentage of net capital investment by S&P 500 companies against Gross Domestic Product (GDP) of the United States. The chart shows clearly that market peaks happened before peaks in net investment. We are near one of those moments again. In Part IV, we looked at $3 trillion in aggregate purchase commitments, future leases and guarantees backing third-party debt, and various off-balance sheet potential liabilities , all pointing toward a couple more years of record investment AI data centers. Recent earnings reports, filings and conference calls provide clues as to how stressed, or not, each hyperscaler really is. Consider subscribing to Cassandra Unchained to receive feature articles in full, Trading Posts, Short Thoughts, and the best Chat on Substack, Or, become a free subscriber and just monitor for possible full subscription at a later date. Read more
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IBMInternational Business MachinesNeutralInternational Business MachinesShorting the Dollar by Drinking Free First Growth Bordeaux For Life
During my couple of decades running money for others, I was often asked to share alternative ideas that I had came across, worked up and found interesting. Alternative investments are ideas away from traditional stock and securities markets that nevertheless comprise an investable asset. Typically these assets would not be stock replacements but rather non-correlated with stocks and even bonds. In fact, alternative investment theses would have to be unique, thoroughly researched, and heavily non-correlated to make the inevitable friction of moviing away from publicly-traded securities markets a worthwhile endeavor and a sound investment decision. Now, I can share these ideas with you. They do not come along often. I shared this one with you rather ineffectively yesterday, as two copies of the article intertwined in the body of the text. Hence, I am sharing again, without such complications. Enjoy! At some point in the near future, AI along with quantum computing may have our digital assets on the run. Crypto, yes, but also our bank accounts, our investment accounts, our pensions, Social Security, health insurance. IBM sees delivering its large-scale fault-tolerant quantum computer, Starling, by 2029. I wonder who or what will be allowed to be a customer. (By the way, I recommend the IBM Quantum Computing Blog , a fun follow.) I asked an IBM quantum engineer. He said he did not know, did not care. There are few guardrails on progress, which is maybe as it should be. Systems will adapt, but transitions will come so fast and with such power that one finds it hard to imagine all digital claims continuing to be verifiable and safe in any kind of continuous, unbroken and protected fashion. There certainly will be gaps. We hope they just hurt and do not graduate to catastrophe. In such a world, the dollar could accelerate its ongoing loss of reserve status to real assets. Gold is performing well lately in preparation for a cyberpunk future that looks possibly scarier than Bill Gibson had imagined. Gold this decade has finally joined the financial markets as a marker of too much debt, too little monetary restraint, and too much AI and quantum computing risk piled on top. Still, one cannot eat gold. Actually one technically can, but the holy triad of human existence is food, sleep, and the reproductive act. Maybe somewhere in there, achieve something. It makes sense to hedge with uncorrelated, physical/real hard assets. Those who can provide or address tangible real-world needs will possess a valuable position. Cater to the hard asset needs of the top 1%….well, such would be invaluable. BONDED FINE WINE Food-adjacent, sleep-adjacent, and sex-adjacent sit wine and spirits. Wine is perhaps not simply adjacent but rather the very best friend to two of the three. Spirits are interesting. Once in the bottle, they do not age. As well, vintages matter little, and weather not so much either. All those things, and more, do indeed matter greatly for wine. In defining characteristics, fine wine is embarrassingly rich. With the finest wines for the top 1%, the number and complexity of their characteristics (both the wine and the top 1%) inspire resilient demand in good and bad times. I’m talking names like Pétrus , Domaine Romanée-Conti , Mouton Rothschild and Margaux . As well, on the Tuscan side, Sassicaia , Ornellaia , and Solaia . Those names might seem a Rorschach test for wealth, just as trade in the finest of European wines might seem restricted to those with means. To an extent, yes. There should be some level of net assets such that one can allocate 10% or less of one’s portfolio in probably five figures (as a lower-end threshold) to bonded fine wine. In practice, there are few hard thresholds, few limits. Dealers will take the money. The key is to know when to hand it over, or, better, when not to. Trade in wine has almost as many characteristics as its star beverage. Truth is the wine market, and more specifically the European bonded fine wine market , is a diverse, liquid market (ba dum tshhhh) and therefore analyzable and investable. I find parallels to investing in securities such as stocks and bonds. Yet here the market-makers amount to a few handfuls globally, and many investors are largely unaware of the opportunities presented by bonded fine wine. For instance, right now, just about every single case of fine wine sitting in a London bonded warehouse can be a short position on the U.S. dollar , a global hedge against fiat currency , and a ward against global financial systems’ vulnerability to the various hellscapes possibly wrought by future iterations of AI and quantum computing . As well, not too many people think their bonded fine wine in storage might benefit from the release of quantum computing, or, say, a $1.25 trillion federal debt interest expense tab. It was the first thing I thought. What got me here was I heard that wine is in a bit of a depression. My eyes, ears, and every hair on the back of my neck perk up when I hear of formerly highly valued assets beset by a case of the doldrums. Both the doctor and the devil in me. In any event, I started digging. To my surprise, I kept digging. The Thesis What I am about to present is an investment thesis that can be put on replay, through one’s very own mouth, across the holiday season’s events to appear both fiendishly foresighted and wildly worldly whilst being ogled like a three-legged dog. That alone ought be worth the subscription to CU, right? Sign up for in-depth Posts, earnest Trading Posts, Short Thoughts for current event reactions and short updates, and remarkably erudite Chats. I frequent the Chats for impromptu Ask-Me-Anything Sessions, and I publish My Thought Pad with hundreds of my thoughts, ideas, charts and favored stories each month. Everyone loves a three-legged dog. I demand at least three legs and preferably five legs under every investment I make. Else that dog don’t run. Below, the three legs of my bonded fine wine with dividends thesis. Read more
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LULUlululemonNeutrallululemonShort Thoughts - Cassandra in Flames?
I have been asked what it is like to lose money. To have stocks just not go my way, and many have asked for a review of Tailored Brands, which was a permanent loss of capital. Tailored Brands was a mistake, not a big one but made worse because the permanence of the loss. The stores are still around operating. I never made it a very large position. That bankruptcy was odd in many ways, and I cannot take many lessons from it. The company was one of those small caps where owned land and buildings might hide enough value to affect the investment thesis. And I saw some of those assets. I saw liquidity if they wanted it, but they chose bankruptcy. So let it be written. So it was done. Today, lululemon (LULU) is the trickster in my portfolio. This time the trickster is my largest position, and it does seem determined to take me where mermaids fear to tread. Read more
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