Quality matters in the neocloud space. I think lumping them all together is a mistake. Neoclouds can still get loans but it’s getting harder and how much they pay comes from how risky they look. Lenders care a lot about how strong customers are and how long those customers are signed up for since that’s the money that is paying back the loan. How new the company is and how much debt it already has are obviously key as well. Musk is arguing lenders have mostly stopped lending to companies that don’t bring in a lot of revenue outside AI data centers and he uses $SPCX as the example. They have Starlink and launch revenue and last week it cost about 2.3% a year to insure their debt against default. $CRWV makes almost all their money from AI data centers and it cost about 11% a year to insure their debt. But it doesn’t look like you need outside revenue to borrow yet. $NBIS makes almost all their money from AI cloud. They have customers like Microsoft and Meta and on Oct 17 during this selloff they got a one year $3.5B loan from Citi starting at about 6.7%. Compare this with Volta which is a new company and got a loan at about 10.5% two days earlier. They had to pay more than first planned to get it sold.

I think Trump’s deal with Russia is about getting Ukraine to stop hitting Russian refineries. Trump keeps pushing for it since Ukraine hitting those refineries is a big part of what’s holding back Russian fuel. If Ukraine stopped Russia could fix them and export more but bigger repairs take months. I don’t think Russia is offering unlimited diesel. Their deputy prime minister said buyers can have as much as they want from what Russia will export. And so far this month Russia is exporting about the same amount as last month. Not sure this does much for diesel prices. The deal is also a big change in US policy. The US is letting Russian diesel in even though Congress banned it. I have seen senators from both parties say this breaks that law so we have to see how this develops.

$META new non voting shares let Zuckerberg keep control while Meta can raise money and he can sell some stock. Looking more into the filing Meta’s board members did push back on the size of the share dividend. Zuckerberg wanted 20 new shares for every share. The board offered 1 for every 9 and they ended up at 1 for 1. More new shares would mean more stock he could sell without giving up votes. But they didn’t get any limits on his control. In 2016 Facebook’s board made him agree that in most cases he would lose control if he left the company. This time he said no to that kind of rule and they approved it anyway. Last week a Delaware court blocked a similar deal at $NET because Cloudflare’s board members likely went along with what their founders wanted. Meta’s board also went along with Zuckerberg on control but nobody has sued yet so we don’t know how a court would rule.

Continuing to monitor the 2022/2023 bitcoin:native fractal situation! Retest of support is normal so let's see what happens. Hope everyone has a great weekend!

$META new non voting shares let them raise money without Zuckerberg losing control. It should be harder to challenge than when $GOOGL or Meta (Facebook) tried it. Google tried this in 2012 and got sued. They settled in 2013 and agreed to pay shareholders if the new shares traded lower. The shares did trade lower and Google paid $522 million in 2015. Meta tried it in 2016 when they were Facebook but got sued and dropped it right before trial in 2017. A new Delaware law in 2025 protects deals like this if independent board members approve them “in good faith”. Meta had independent board members approve it and Zuckerberg signed off with his own votes. But last week a Delaware court blocked a similar deal at $NET because Cloudflare’s board members likely didn’t act in good faith. It now goes to trial. Not a lawyer and I don’t play one on X!

With $BE they are bringing in more revenue than ever but growing is now eating into their cash and right now the market seems to want cash more than growth. Why? Well a lot of Bloom’s customers are AI companies that are borrowing more to build and in the higher rate environment that money is getting harder to get. If it keeps getting harder Bloom could end up waiting longer to get paid. AI spending being ahead of revenue is well known. But right now that worry is hitting AI stocks in general and Bloom is caught up in it.

Gold is back in a tricky spot near the summer lows. Oil is back up with these attacks on Saudi Arabia. This is putting continued pressure on inflation and it is keeping rate hike odds in December high. This AI stock selloff has people moving into bonds instead of gold. US10Y had its biggest one day drop in over two years and that should have helped gold but it kept going down. This could be gold investors selling gold for cash to cover any positions that got hit in this AI tech selloff.

So many are wondering what’s going on with $BE after such a great quarter. Bloom hasn’t been paid for a lot of what they sold yet and permits are now slowing down some of their projects. Bloom made $250M of profit in Q3 but their operating cash flow was negative $27M. In the 10-Q you can see a lot of that comes from $464M of Q3 revenue they haven’t been able to bill yet. They only get to bill once a project reaches certain stages or the customer signs off on it. Q1 and Q2 were both positive so operating cash flow is still $273M for the year. Bloom’s CFO said they don’t expect Q3’s negative cash flow to keep going. But that depends on projects staying on schedule. Bloom has paid suppliers $337M in advance this year and if projects get pushed back they could end up with more inventory than they need and less cash. They say permits are now delaying some of their projects. They usually can’t sell the systems to the investors paying for a project until it has its permits so a delay can mean Bloom gets paid later. Their biggest project is the $ORCL data center in New Mexico and it still doesn’t have its air permit. The permit hearing isn’t until December 7 and an October 26 hearing will look at whether to throw out the application.

The yen continues to strengthen with inflation numbers coming in above BoJ target. The BoJ has been saying it’s worried about waiting too long to hike. The issue is hiking enough before inflation gets stuck above 2%. And now with headline and core both above 2% I think a December hike is more likely. Global stocks also sold off today and that helps the yen. People buy the yen as a safe haven when stocks drop and some close out carry trades which means buying the yen back. US yields also dropped today because money moved into US Treasuries. People hold dollars over yen because US rates pay more and when US yields drop that extra pay gets smaller. It looks like the carry trade is fairly calm for now. Yen short positions are a lot smaller than they were in July after most of them were closed out in August and September.

The new $SPCX 10-Q shows one customer SpaceX doesn’t name made up 1/3 of their revenue in Q3. That’s about $5.0B and it’s 2/3 of their AI revenue. In Q2 the same customer was about $1.5B so it more than tripled in one quarter. It looks like it could be Anthropic. Reuters reported Anthropic’s contracts with SpaceX are worth up to $84.5B into 2029 which is nearly double the original deal. We don’t have that confirmed but if Anthropic files publicly soon then the S1 should show their SpaceX contracts.

Yields keep moving with AI stocks. When AI sells off people run to bonds and yields drop and when AI bounces yields go back up. The market is asking if all the money going into AI will pay off. It’s most worried about companies borrowing to pay for it. About 40% of US growth is coming from AI spending so yields falling seems to show the market is starting to question that growth. Those growth concerns would feed the recession risk. When people start losing their jobs that’s when the music stops. But so far the job market is ok. Layoffs are still low but hiring looks like it could be starting to slow down. Yields aren’t falling because inflation is cooling. We need this war to end to send oil down which will help cool headline inflation. Core still seems sticky and the longer oil stays high the more it risks spreading into other prices. If it pushes wages up that could keep inflation from coming down but so far wage growth is slowing. I don’t think many doubt AI pays off eventually. We’re being promised trillions in AI revenue and it’s growing fast. But the spending comes first and the revenue comes later. The wait in between is where things could get uncomfortable especially for companies that borrowed heavily.

The yen is gaining on USD because US yields have come down and the Fed is expected to hold rates next week. Japan’s inflation is around the BoJ’s 2% target but rates are only 1.25% so borrowing is still cheap. With a weak yen and high oil pushing prices up the BoJ wants to keep hiking before inflation goes past 2%. The market continues to price in a December hike. Bessent has been pushing the BoJ to hike since the summer because higher rates in Japan support the yen without Japan having to sell US Treasuries to do it. But the market thinks the Fed will hike in December as well so the difference between US and Japanese rates may not change much. Japan’s inflation numbers come out tonight and a higher than expected number would make a BoJ hike in December even more likely.

$META is doing almost the same thing $GOOGL did in 2014. Google gave shareholders a non voting Class C share for each share they owned so Page and Brin could keep control while Google kept issuing stock. The Class C shares traded lower than the voting ones and Google ended up paying $522 million to make up for it. The big difference is Meta wants to use these shares to help raise the hundreds of billions they say they need for AI. Google mostly used theirs to pay employees and buy companies. And it is also for Zuckerberg. If California passes its billionaire tax next month he can sell some of his new shares to pay it without giving up votes.

Layoffs are still really low but hiring looks like it’s slowing down. US jobless claims fell to 194K last week which is the lowest since July. But ADP’s weekly jobs number had been going up since August and just dropped to 18,500 from 26,000. More people are also staying on unemployment which can mean it’s taking longer to find a job. Claims can stay this low while ADP drops because they count people applying for unemployment and ADP counts how many jobs companies added overall. Most companies still have enough business to keep their workers. But fuel and tariffs are costing them more so it looks like they are being careful about hiring. It seems some companies don’t need to hire as many people now that they’re using AI. There are still more jobs being added than in July and August according to ADP. They revised their last two numbers up so this drop might end up smaller. We will know more on November 6 when BLS reports October and revises September.

$SPCX expects revenue to more than double in six months and most of that growth comes from AI. Part of it is from deals they have signed or expect to sign and part is from their own products like Cursor and Grok Bot. Either way SpaceX needs a lot more servers running to do this. That’s why they’re spending so much in Q4. They say demand isn’t the problem so it depends on how fast they can build.

Bessent wants US long yields lower but Japanese investors have sold foreign bonds four weeks in a row. Japan holds more Treasuries than any other foreign country. A US 10 year used to pay about 4 percentage points more than a Japanese 10 year and now it pays about 2 more. A lot of Japanese buyers hedge the dollar and that costs them more than 2 points so a Japanese bond pays them more. That’s been true since 2022 but Japanese bonds now pay almost 3% so they are finally worth buying instead. AI companies are borrowing a lot right now and a big part of it is long term debt. They sell it to the same pension funds and insurers that buy long Treasuries. The US government is competing with AI companies for those buyers at the same time Japan has less reason to buy US bonds. But US auctions are still getting strong demand at yields above 5%. Bessent needs that demand at lower yields and so does anyone hoping for lower mortgage rates. When the 10 year goes up mortgage rates go up with it and the average rate is 7.4% now.

ETF investors have pulled more money out of ethereum:native this month than in any other month this year but Ethereum is still holding its weekly support. JPMorgan put their dollar token on Ethereum on Monday. Two of their funds are already on it so it looks like they’re building more of their business on Ethereum. The suits are getting on board. Are you?

$SPCX is getting paid more to rent out their AI servers than they expected and customers are paying more when their deals renew. They said they keep their deals short because they expect prices to keep going up. When SpaceX went public the Anthropic and $GOOGL deals were worth about $2.2B a month. Anthropic’s original deal can already be ended with 90 days notice and Google’s can from next year. But if prices fall customers could leave or pay less when their deals renew. Then it would take SpaceX longer to make back what they spent on the new servers. Right now they say new servers pay for themselves in under a year which helps them pay to build more.