MarketMetalysis

the biggest downside i see is next year capex, most of the capex is assumed from FCF, and the growth in capex they see in 2027 is funded mostly by the estimates for increased FCF, which is fine if a perfect scenario happens but oil price is going to pull consumption from possible growth of all non oil related sectors. so either hyperscalers products somehow maintain a completely inelastic demand profile AND grow alongside that inelastic demand, or demand falls for their products and earnings expectations for next year are too high. the obvious counter argument for this is the compute they are running makes the money to invest in more capex but the relative size of the hyperscalers legacy business makes that argument hard to balance against the small (as of right now) sales these companies make from ai compute specifically. The other alternative to this is issuing more debt/equity to pay for the increased capex if FCF doesnt't meet it. this is ignoring all the possible cannablization of their legacy business sales from companies which might switch to paying for the insane cost of tokens.

Preparing for earnings next week. Analyst expectations (mostly what the companies are saying) for capex

@Rory_Johnston what if iran spoof their ais signal saying they are coming from iraq instead

a modest proposal

@dampedspring sorry if this is too expansive. in you're opinion do you think if hormuz is, lets say at its current pace for the rest of the year the fed would do a 2022 similar scenario (raise rates aggressively) or favor some other sort of response mechanism. just curious on your "vibes" for the fed, cus i think u have a pretty good idea for it, when it comes to a obviously non-transitory inflation shock(bigger than small shock but not something like "world ending"). im just using the hormuz strait closure staying the same as the catalyst in this case, not saying that scenario does happen.

iran propaganda 80% chance. they have been lying about negotiations basically all the time, put up a stance but turn up. not that i think they are guna make a deal this time especially with IRGC hardliners apparently gaining more control but they are def guna try and keep status quo going cus its in their interest as it buys them more leverage.

I hate when the person for whom I'm flying 18 hours to the other side of the planet to meet announces that he has no intention of meeting with me.

@DannyDayan5 im glad i lived through 2022, just so i could live through it again 4 years later lmao

Oh look, consumers expect 7.7% inflation in a year. "Inflation expectations are well anchored" Fire them all!

@BurggrabenH 71 billion for 40 days. fucking wild bro, i can't even imagine how much money would be spent for a total war in todays age.

Remember the “US military must pivot to Asia” narrative? Here some preliminary numbers by CSIS. In the 39 days of the air and missile campaign before the ceasefire, U.S. forces heavily used the seven munitions in Table below. For four of them, the United States may have expended more than half of the prewar inventory. Rebuilding to prewar levels for the seven munitions will take from one to four years as missiles in the pipeline are delivered. These missiles will also be critical for a potential Western Pacific conflict. Even before the Iran war, stockpiles were deemed insufficient for a peer competitor fight. That shortfall is now even more acute, and building stockpiles to levels adequate for a war with China will take additional time. Diminished inventories will also affect the U.S. supply of Patriot, Terminal High Altitude Area Defenses (THAADs), and Precision Strike Missiles (PrSMs) to Ukraine and other allies and partners that use them. The United States will compete with those countries that also want to replenish and expand inventories. The art of the deal

wait, maybe you got the wrong idea, or im dumb. i was just trying to say agree with you that its important to take oil bulls in moderation especially the knock on effects. im not trying to say we can have massive growth impulse alongside biggest energy crisis ever easilly at all. sorry if it came of in a way of me trying to say you're bearish argument is wrong? personally i am bearish global economy and slightly bearish US economy.

@MarketMetalysis @Tyler_Durden77 @DanielTNiles Yes. There are worlds of massive pro growth demand driven energy rallies. Is that what you think the world today really is? Cuz if so you need your head examined

$NOW lowering margin guidance will be an important test. Those that think AI disintermediating software is an over-done theme has helped push $IGV (software ETF) from -37% to a 52 wk low to +19% vs S&P +5% in the past 8 trading days. Will this mark a near-term top? Watching how the bigger names like $ORCL and $MSFT as well as the important security names like $CRWD and $PANW handle the ServicNow results will be an important tell. I used to have a yellow sticky taped to my monitor that said “Do not fight the hard battles.” Even investors that were right in 1999 about $AMZN being the ultimate winner in e-commerce with revenues nearly doubling from $1.6B to $3.1B by 2001 had to suffer through the 95% stock decline from its peak in late 1999 to trough in 2001. It is a solid point that tech valuations were higher then but to me the time it took to reach the ultimate bottom is equally important. This is not to discount the breath-taking rallies along the way. The S&P rallied seven times with an average of 14% each occurring over roughly two months while losing 49% over 2.5 years during the bursting of the internet bubble. During each one of those, it looked like THE bottom to some investors. However my view is with agentic AI really coming to the forefront earlier this year as shown by the formalization of OpenClaw in late January, the software landscape has not had enough time to reshape in less than six months. ServiceNow among others aim to be the “control tower” connecting cloud infrastructure, LLMs, core business data and applications. However, despite their broader utility, they may still lose market value alongside more niche, single-purpose software companies during a sell-off. The CFO of a corporation will have to find a way to save costs from their expanded coding budget for Anthropic and OpenAI. Companies will not be able to sell that they are benefiting from AI versus being run over by it without having the numbers to prove it. Tactically buying at oversold levels and leaving before the reality of companies having to report is typically my strategy during these times of big technological shifts, especially following a big market rally. The lackluster stock reaction of important early reporting tech companies like $TSM, $ASML and $NFLX despite the strength in the overall market was a reminder of that. Coming up, five of the Magnificent 7 are set to report next week with $AMZN, $GOOGL, $META, $MSFT on Wednesday (the four big hyper-scalers have never been on the same day before) and $AAPL the day after. The overall market is also at overbought levels technically. Some combination of the following reasons could lead to guidance or some metrics like margins being less than hoped for in some cases: 1) close rates on big deals were impacted at the end of Q1 by the Iran war, 2) the surge in semiconductor prices could not be fully passed through to end customers and will impact margins going forward, 3) rising oil prices are impacting our shipping costs, 4) falling consumer confidence due to the geopolitical uncertainty is impacting advertising budgets, and 5) demand has been pulled forward by customers looking to get in front of price increases and will therefore result in less growth in 2H:26. As Warren Buffett says, “the market has to keep pitching but you do not have to swing.” I feel like Ohtani is now on the mound.

very true, also important to understand there are worlds oil can go up a lot and growth is fine, the economy managed 140 post 2009, sure growth was lower but it wasnt stopping the economy slowly coming back from GFC. difference between growth shocks and recessions, for oil to create a recession in america you need absurdly high oil price domestically (cus america can just cap exports if they want) or complete lack of supply to force economic stagnation.

This is my framework and the logical cause of December oil going back down is the peaceful resolution of the war. As to oil specialists. Be super careful. Follow those who can logically express both sides and aren't doomers about $200 oil, shut ins, perma conflicts, productive capacity destruction etc. the bull case may be correct but no use following someone who is an "expert" in the field and can't conjure up a real bear case.

@sidprabhu genuinely have no words, this guys port is as volatile as a reddit options account.

He ended up -40% last year and is -37% this year, so since 2019 about 7% annualized return with immense volatility. Why would anyone invest in this?

@WarrenPies @TMTLongShort $12-$15 per W

rental prices have no realistic application to actual contractual prices beyond sentiment. if you were to pitch those rent prices in contract u would get blown the fuck out of the meeting most orcl servers iirc are doing $12 per mw and azure aws and gcp will be around there for b200-300

Jim Chanos blocked me when I politely suggested this to him six months ago 😔

@dampedspring wait im confused are you saying spx moved because of CAR? peak mCap was 25billion would it really have any impact on spx? i would assume most of spx move is SMH

7133 SPX is to $CAR at 700 As $CAR at 240 is to SPX at ? Momo and short squeezes can run in your face a while. They've run in my face from 6980. Patience and right sized

@DannyDayan5 @NickTimiraos the job of the fed now is to do this. cpi to core cpi to supercore to trimmed mean, soon they will make their own truflation measure and just choose their own inputs

@NickTimiraos Serious Question - Can they Fed just keep redefining inflation to whatever is the lowest and get away with it while sentiment surveys are at 100 year lows over high prices?

At his confirmation hearing, Warsh dismissed core PCE as "rough swag" and said he'd prefer to focus on better gauges of underlying inflation like median or trimmed mean. This got attention because Dallas Fed trimmed mean was 2.3% in February (y/y)—well below core PCE at 3.0%.

@BobEUnlimited @thedailyshot you think savings rate will fall further to support this retail spending or do the tax refunds cover it? has to come from somewhere

Signs of some slowing in demand in recent weeks. h/t @thedailyshot

@DeepDishEnjoyer bro u need to stop this shit is killing me

whats your take if we have indefinite ceasefire and it just goes on for 2+ months more ish, i see 2 possible scenarios. 1: continued oil demand destruction in asia, most of the easy reduction in industrial/petrochemical demand sectors is gone but im not myopic in the view that this situation has to push oil prices up to some insane price to destroy demand enough for the imbalance. lots of buyers have postponed because of possible re-opening so they will have to admit defeat and close down business if they can't run at less than half utilization or just cut throughput if they can go below 50% utilization. 2: the continuing oil shortage continues to draw barrels from WTI/BRENT complexes and intern eventually forces extremely high prices due to the european/american buyers pushing them up as they have less elasticity as asian (especially chinese state refineries/teapots). barrels from us/eu can definitely support a month or so more of oil demand maybe 5mbpd below pre war with issues alongside (like travel time and yield from different oil blends especially distillates and jet fuel which is what asia mostly demands). my issues with 1 is that we dont really know how markets will react when US inventories start drawing to required levels, the existing ships balast en route to america rn will draw 75-125mb and avg estimate for required is around 285-325 so we are much closer to that number. my issues with 2 is that as we have seen, the oil financial market can stay very disconnected from "barrel counting" like it was in 2022 due to volatility forced by RHETORIC not data making buyers/sellers actually just leave the market altogether. know many industry people who just arent hedging right now because its just impossible to do so and selling has become mostly financial due to constricted supply. either way, both lead to material decreases in EM growth especially in asia, south america can actually weather this pretty damn well. this would then flow into hyperscaler earnings and it would mean they either issue debt or cut capex which multiplicatively effects downstream supply chain like memory companies which have had the largest impact on spx earnings.

My read on war: IRGC is firmly in command. “Moderates” have been removed. Negotiating with them is like negotiating with the Nazi party. Seems pointless to me and a waste of whatever they claim was accomplished earlier.

@dampedspring whats your take if we have indefinite ceasefire and it just goes on for 2+ months more ish, i see 2 possible scenarios. 1: continued oil demand destruction in asia, most of the easy reduction in industrial/petrochemical demand sectors is gone but im not myopic in the view that this situation has to push oil prices up to some insane price to destroy demand enough for the imbalance. lots of buyers have postponed because of possible re-opening so they will have to admit defeat and close down business if they can't run at less than half utilization or just cut throughput if they can go below 50% utilization. 2: the continuing oil shortage continues to draw barrels from WTI/BRENT complexes and intern eventually forces extremely high prices due to the european/american buyers pushing them up as they have less elasticity as asian (especially chinese state refineries/teapots). barrels from us/eu can definitely support a month or so more of oil demand maybe 5mbpd below pre war with issues alongside (like travel time and yield from different oil blends especially distillates and jet fuel which is what asia mostly demands). my issues with 1 is that we dont really know how markets will react when US inventories start drawing to required levels, the existing ships balast en route to america rn will draw 75-125mb and avg estimate for required is around 285-325 so we are much closer to that number. my issues with 2 is that as we have seen, the oil financial market can stay very disconnected from "barrel counting" like it was in 2022 due to volatility forced by RHETORIC not data making buyers/sellers actually just leave the market altogether. know many industry people who just arent hedging right now because its just impossible to do so and selling has become mostly financial due to constricted supply. either way, both lead to material decreases in EM growth especially in asia, south america can actually weather this pretty damn well. this would then flow into hyperscaler earnings and it would mean they either issue debt or cut capex which multiplicatively effects downstream supply chain like memory companies which have had the largest impact on spx earnings.

eventually, scaling laws or economic viability of training clusters will win out and cause token gen to stall then efficiency+scaling laws push token prices to near 0. i think for hyperscalers there will be 2 main avenues for money. 1: larger models will probably take a long long time to ever be viable on edge or on-prem. 10+ trillion parameter models with absolutely fucking enormous kvcache required just isnt realistic. These models will be used by the best companies like f500 or r2000 cus they want the "best" even if you can get the same for free due to support security etc like office 365. 2: owning the platform. i dont think AI will ever be run on the mid level at edge, so owning the platforma allows for bundling etc. side note - i think most people (not tokens) will use burned models, think a company wants to spin up 20000 "employees" they dont need the top of the line model for something they know very well themselves so they burn in a model which allows for much faster and lower hardware requirement. burned in because they dont need to change the model much due to having a business that doesn't change much.

What's the fair price for an AI "token" given its utility measured as ROI

@dampedspring when obamas supreme court justice pick got blocked by republican senators.

What were big aha's that changed your view of the next 10 years over your lifetime? And when I say aha immediately allowed you to picture 10 year from now Some of mine 1. Beta of Netscape web browser 1995 iirc 2. DSL vs dial up, always on internet 3. Amazon 4. Napster 5. AOL for my kids 6. BlackBerry 7. 9/11 8. Fiber speed 9. HFT/Rentech, Hull, Knight 10. iPhone 4 and smart phone Internet 11. QE Era and the permanent priority of financial stability over sound money 12. Palantir at BW in 2011 13. Big Data/web scraping /compute/ml offsite with Brevan Howard in Lake Como in 2016 which gave me AI 14. ChatGPT moment in winter of 2022-2023 Those are the ones that impacted my future outlook. I imagine CT followers will find it funny I don't include BTC, Blockchain, and Crypto but while I get it. I've never had an AHA moment like these above. Still not sure it matters at all. But if it does my aha moment was spring of 2017 when the guy who owned my gym told me about his bitcoin mining activity. Since the. Bitcoin has rallied 16% per annum with stupid drawdowns and low ratio. But again. Not the point of this little review. So relax CT guys. I didnt miss it I just don't care as much as you.

is it really constructive to suggest the market can see through potential impact of a energy crisis which has never happened before in this size, in a completely different financial regime than the last slightly comparable (1970s) instance. people said the same about covid, about how the market can see through the risk of spread and potential impact of nations. massive potential slow moving things like this tend to not really get priced in by markets so well, GFC was another one where it was abundantly clear shit was going very bad if you actually looked and people were talking about it a lot back in day just as they are the barrels today, and still the effect is delayed. market will look through all of this trouble, AND THEN price it in when situation becomes calmer, the last few weeks has basically all been a binary trade of escalation or no escalation, if there was any trading on hormuz then we wouldn't be back at ath when the hormuz strait has only become more unclear when it comes to who owns it who can go through it compliance for shippers etc.

@foolishyangban @Rory_Johnston You mean all the oil trading desks across the smartest trading houses and HFs are leaving money on the table by not incorporating data from an exercise that's basically their bread and butter of forecasting demand vs supply??

Just like Liberation Day last year, “trade war + TACO + higher tariff rates across the board” was actually more bullish than no trade war at all. “Iran conflict + TACO + disrupted and destroyed oil supply” will prob be more bullish equities than no Iran conflict.