PPG retweeted
"Only 15% of debt and lease commitments appear on balance sheet for the big seven AI companies; that may explain why their credit spreads have been widening rapidly"
-Michael Cembalest, JPMorgan
E&Y already looking mistaken. Gilt yields are significantly lower than they were when the OBR was preparing its forecast.
Fiscal headroom is has improved since the Budget. It's larger now.
UK: Worth noting what the OBR said about gilt yields:
"A 1 percentage point increase in gilt yields on new debt issued and on Bank Rate expectations across the forecast period, directly via its effect on debt interest payments, is expected to increase the current budget deficit by £13 billion in 2029-30 and £16 billion in 2031-32."
PPG retweeted
Worth noting that this amount of money is basically greater than Treasury’s fiscal headroom.
We are impoverishing ourselves over this!
PPG retweeted
📢 new blog post ✍️
Here's a more detailed response to the Bank of England's decision to raise interest rates... 🤔
julianhjessop.substack.com/p…
PPG retweeted
Think Beijing will have trouble convincing anyone that an expanding Chinese economy will lead to more imports -- one of the most important stylized facts about China is that imports haven't grown with China's economy the last 7 years
PPG retweeted
Our leading indicators show that both global growth and inflation impulses are now firmly negative.
The chop we have seen in the global growth diffusion has ended with a clear negative impulse.
full thread. 1/7
PPG retweeted
Anthropic’s Q3 revenue growth slowed quite significantly, not just in percentage terms (144% to 47% QoQ), but also in absolute dollars. It added $5.4B in Q3, compared to $6.8B in Q2.
So what might Q4 look like? If we did just 3 super super simple scenarios
Bear: Incremental revenue slows substantially to ~$2.5B or 15% growth QoQ, putting Q4 annualized revenue at ~$78B (Q4 x 4)
Base: Anthropic adds roughly another $5B, about the same as Q3. That’s still ~30% QoQ growth, putting it at ~$88B annualized
Bull: Revenue growth on a % basis stays around ~45% QoQ, but that adds another $7.6B and brings Q4 annualized revenue close to $100B
According to Reuters, though, apparently people who met with Anthropic management are convinced annualized revenue will be at $10 billion, or maybe more. Not sure how they're calculating it tho
graph from @manic_pixie_agi
PPG retweeted
🦔Ares Management, one of the biggest private credit firms, won’t lend against AI chips. CEO Michael Arougheti told analysts he doesn’t know “how to underwrite the decline and depreciation curves” on GPUs, so Ares lends against the data center buildings instead. Plenty of other lenders jumped in anyway, on deals like Broadcom’s roughly $60 billion debt package for chips it leases to Anthropic (SpaceX wants about $40 billion for Nvidia chips too).
My Take
I respect a lender who admits he can’t price something. Most of the market plugged in five or six years of useful life for these chips and called it a day, and I doubt many of those lenders have watched a three-year-old GPU try to keep up with a new one. Ares has its own exposure (a data center only pays off if tenants keep filling it with chips), but at least a building doesn’t go obsolete. I think the loans already written against GPUs get repriced, and CoreWeave (it rents out GPUs, and its bonds already trade near distress levels) takes the first hit.
Hedgie🤗
PPG retweeted
Recent early departures from the ECB - so Macron can pick the successors - is wrong and symptomatic of a European elite that shuffles jobs to itself regardless of the political winds. This further damages the legitimacy of the ECB, especially in Germany...
robinjbrooks.substack.com/p/…
PPG retweeted
There it is.
Over 60% of the S&P 500's components are now in bear market territory, down -20% or more from their record highs.
Four of the Magnificent 7 stocks are now in bear market territory, with these seven names erasing a combined -$4 trillion in market cap since their highs.
We are in a "stealth" bear market.
And, we believe it's a huge opportunity as we outlined below on October 15th.
PPG retweeted
The UK's unsustainable fiscal arithmetic: interest and welfare up, investment down . . . chart shows change in percentage points as a share of GDP
Reflecting on Wednesday’s Budget, I stick to my view that it is one that markets can live with. Judging by the press coverage, however, the reception of the public appears less than lukewarm. No wonder.
For all the Prime Minister’s claims to have big ambitions and a 10-year plan, his government’s first Budget was a small and timid affair.
Critically, it did not even attempt to tackle a key voter frustration: that more of their taxes are going on debt interest and welfare – which is set to rise by an eye-watering amount of almost £100bn between 2025-26 and 2031-32.
On the OBR’s projections, welfare rises by 0.5 percentage points of GDP over this period while debt interest jumps 0.7 points. Meanwhile, public sector net investment is set to fall by 0.5 points. Total spending rises by 0.2 points to 44.7% of GDP. So the cut in investment pays for only part of those increases.
This mix of decisions is decidedly anti-growth: a rising share of spending, partly financed by borrowing, that goes on welfare and interest rather than on productivity-enhancing investment – which is badly needed to lift trend growth and get public finances on a less unsustainable track.
#Budget2026 #burnham #Healey
