Paul | Bitcoin, Crypto & Equities | Macro | Charts & On-Chain | NFA | đ¨đŚ
Ontario, Canada
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The 30% EPS miss from $GOOGL makes the quarter look a lot worse than it was. Most of that came from a loss on their investments.
Alphabetâs EPS includes gains and losses on companies they have invested in so it moves around a lot. Those gains made EPS much higher in Q1 and Q2 and this loss made it lower in Q3.
Without the investment loss EPS would have been $2.67 so it still missed by about 11%. Operating income leaves the investments out and it was 6% below estimates. That explains about half of the 11%.
The rest could be tax. Their tax rate excluding investment gains and losses was about 16% in Q1, 12% in Q2 and 19% in Q3. But we donât know what tax rate analysts expected.
Even with the miss operating income was still up 30% YoY so the business is fine for now. But Search has slowed every quarter this year from 19% growth in Q1 to 12% in Q3.
Search is still half of Alphabetâs revenue and AI research and other company costs were up 71% YoY. If Search keeps slowing while those costs keep going up that becomes a problem.
Maybe Kevin No Guidance Warsh is living up to his name. He didnât give any guidance for December and held even though inflation isnât meeting his own standard.
In September he said inflation has to be heading back to 2% âclearly and at sufficient speedâ and it isnât. Remember we got hot CPI and PPI since that last hike.
2 Fed officials dissented and Cook was a surprising one. It is her first dissent since joining in 2022. That is 2/4 meetings Warsh has had dissents over the rate decision.
He said financial conditions have moved in the right direction after the hike but not far enough that heâd call financial conditions tight. Not being tight seems like an argument for hiking but he pointed to the tightening so far as a reason to wait. đ
Basically he wants more data to better judge December. Currently FedWatch has ~85% hike for December but lots of time for that to change.
We have the BoC hiking because they are worried about second round effects from the current oil supply shock.
They are doing this to the Canadian economy thatâs barely grown per person since 2015. Most of the growth we had came from population growth. Productivity is the issue.
The BoC targets total CPI inflation at 2%. Headline is 3.1%. Core and ex energy are at about 2%. Without this energy shock we are close to the target. The BoC also says the economy is still running below what it can produce.
And that shows up in growth and jobs. Growth is expected to slow to a 0.8% annual pace from October to December as the new tariffs hit.
Canada lost 110K jobs in August and September and unemployment is at 6.5%.
I donât think the BoC hike makes sense based on their own report. They are worried businesses will start raising prices to make up for the higher costs they have absorbed so far. But their own report says that hasnât really happened yet.
So how does a hike stop that? It makes it harder for businesses to sell and that doesnât fix their costs. It just leaves them stuck with those costs while their borrowing costs go up. Most businesses will likely deal with that by cutting hiring.
The BoC thinks this hike is small enough that it wonât slow growth much. But we have had a growth issue in Canada since 2015 and businesses and workers are already weak.
They are hiking on where they think inflation is going. But their own report says the trade war could make businesses hold off on hiring and expanding.
đ¨đŚBoC has hiked for the first time since 2023. I donât think this is the right move. They seem to want to get ahead of any pass through that could happen since this supply shock is continuing longer than most thought.
It is strange to me because Canadaâs core inflation is still low. CPI trim and CPI median actually fell in September to 1.8% and 1.9%. Even the BoC said the case for holding was that the rise in inflation is mostly energy and core is still close to 2%.
The suits at Desjardins say the BoC has to act on where inflation is heading and not where itâs been. But that depends on how much of this oil shock gets passed through. The BoC was late to hike in 2022. But CPI trim was 4% when they started hiking and now itâs 1.8%.
Businesses saying they plan to raise prices doesnât mean consumers can afford to pay them. Wages are up 2.3% while prices are up 3.1%.
A hike doesnât fix the oil supply problem. It makes borrowing more expensive while households are already paying more for energy. Canada is only expected to grow 1% this year and lost 110K jobs in August and September. Unemployment is at 6.5%.
Most of this yearâs growth came before trade talks broke down. Growth is expected to slow to a 0.8% annual pace from October to December as the new tariffs hit. The BoCâs rebound next year counts on exports and business investment picking up while the trade war is still on.
So why can the US consider hiking? Their inflation is at 3.7%, growth is expected at a 2.3% annual pace from October to December, they added 162K jobs in August and September and unemployment is at 4.2%. The US has more of an inflation problem than a growth problem. Canada has the opposite.
The BoC is acting on where inflation is heading. But what about growth and jobs? I will continue to dig into this.
đ¨đŚBoC has hiked for the first time since 2023. I donât think this is the right move. They seem to want to get ahead of any pass through that could happen since this supply shock is continuing longer than most thought.
It is strange to me because Canadaâs core inflation is still low. CPI trim and CPI median actually fell in September to 1.8% and 1.9%. Even the BoC said the case for holding was that the rise in inflation is mostly energy and core is still close to 2%.
The suits at Desjardins say the BoC has to act on where inflation is heading and not where itâs been. But that depends on how much of this oil shock gets passed through. The BoC was late to hike in 2022. But CPI trim was 4% when they started hiking and now itâs 1.8%.
Businesses saying they plan to raise prices doesnât mean consumers can afford to pay them. Wages are up 2.3% while prices are up 3.1%.
A hike doesnât fix the oil supply problem. It makes borrowing more expensive while households are already paying more for energy. Canada is only expected to grow 1% this year and lost 110K jobs in August and September. Unemployment is at 6.5%.
Most of this yearâs growth came before trade talks broke down. Growth is expected to slow to a 0.8% annual pace from October to December as the new tariffs hit. The BoCâs rebound next year counts on exports and business investment picking up while the trade war is still on.
So why can the US consider hiking? Their inflation is at 3.7%, growth is expected at a 2.3% annual pace from October to December, they added 162K jobs in August and September and unemployment is at 4.2%. The US has more of an inflation problem than a growth problem. Canada has the opposite.
The BoC is acting on where inflation is heading. But what about growth and jobs? I will continue to dig into this.
The difference between the $SKHY and $MU earnings is interesting. On their long term deals Micron tells investors:
- What their deals with set pricing are worth at minimum
- That customers have to pay even if they donât take the memory
- How much customers have committed and how much cash theyâve already paid in
- When that cash gets paid back
- How their pricing is split up
SK hynix said a lot less yesterday. They said their deals usually have a price range and include deposits but didnât say what the deals are worth, how big the deposits are, when they get paid back or if customers have to pay when they donât take the memory.
Some of this could be accounting rules. US rules make Micron report the contracted sales they havenât delivered yet every quarter with some exceptions. SK hynixâs Korean rules generally require that once a year but a big change can require a quarterly update. Yeah accounting....đ
SK hynixâs full Q3 report is due by Nov 16 and maybe we get more. In July SK hynix didnât say how much of their sales the deals would cover. Now they say itâs more than half of 2027 and 2028 capacity but still nothing on what the deals are worth or how big the deposits are.
Not Another Quant retweeted
Why is $MSFT offering about 1/4 of their employees money to leave? Microsoft says the offer is for people who were already thinking about leaving and that it isnât a sign they need fewer employees.
But that doesnât really line up with what they told investors in April when they said they expect to have fewer employees by June 2027.
This seems to be about money. They are spending a massive amount on AI and I think they know they wonât need as much staff as AI makes people more productive.
They are already making about 20% more revenue per employee than a year ago but how much of this is due to productivity vs something else is more difficult to say.
I donât think they expect everyone to take the offer. In the spring they offered early retirement to some longtime US employees and ~30% took it. They also said they expect a much smaller percentage to take this offer.
So we keep watching and see if Microsoftâs headcount keeps falling while revenue keeps growing? Is AI starting to take the jobs?
Not Another Quant retweeted
$SOFI faithful let's stay out of goblin town. SoFi is back above the 200 week EMA and we really don't want to go below that again.
That 50 week going under the 100 week soon is bearish lagging and mostly just explains what has happened. Especially since SoFi has been sideways most of the year.
$SOFI faithful let's stay out of goblin town. SoFi is back above the 200 week EMA and we really don't want to go below that again.
That 50 week going under the 100 week soon is bearish lagging and mostly just explains what has happened. Especially since SoFi has been sideways most of the year.
Why is $MSFT offering about 1/4 of their employees money to leave? Microsoft says the offer is for people who were already thinking about leaving and that it isnât a sign they need fewer employees.
But that doesnât really line up with what they told investors in April when they said they expect to have fewer employees by June 2027.
This seems to be about money. They are spending a massive amount on AI and I think they know they wonât need as much staff as AI makes people more productive.
They are already making about 20% more revenue per employee than a year ago but how much of this is due to productivity vs something else is more difficult to say.
I donât think they expect everyone to take the offer. In the spring they offered early retirement to some longtime US employees and ~30% took it. They also said they expect a much smaller percentage to take this offer.
So we keep watching and see if Microsoftâs headcount keeps falling while revenue keeps growing? Is AI starting to take the jobs?
Not Another Quant retweeted
Looking at the $SOFI chart we need it to clear that Sept $18 level and the 200 day EMA. Then clear $20 and hold to stay away from goblin town we just pumped out of.
More SoFi analysis to come! Two recent posts linked in the replies.
Not Another Quant retweeted
$SOFI is making more profit from their revenue but they raised so much new equity that returns on that equity havenât improved as much. Their CFO said they still have a lot of extra capital to grow with. To reach their ROTCE target of 20% to 30% they need to put it to work and generate much more revenue from the capital they have.
ROTCE went up to 9.9% in Q3 which is the highest it has been and most of that came from margins.
But after selling about $3.3B of new stock each $1 of equity brings in 56 cents of revenue a year compared to 68 cents before.
To hit their target, their margins have to keep going up and that 56 cents has to get a lot closer to $1.
They plan to do that by putting the extra capital into more loans. Making more loans for partners also helps because they bring in fees without using much of their capital.
But keeping more loans also means more risk from rates. This quarter their loans lost over $800M in value mostly from higher rates and their hedges made back about $734M of it.
Not Another Quant retweeted
$SOFI Q3 earnings are out and about 90% of their revenue comes from lending and banking like it did in Q2.
Lending and financial services both grew 13% from Q2 so the split stayed about the same.
The biggest change in their fee revenue is origination fees which went from $198.5M to $270.9M. 74% of their fee revenue now comes from loans compared to 72% in Q2.
Out of every $100 (adjusted net revenue $1,371.1M):
$59 lending ($807.4M)
$45 financial services and tech platform ($525.1M + $87.4M = $612.5M)
minus $4 corporate items (â$48.7M)
That $45 is:
$21 net interest income from deposits and credit cards ($281.3M)
$11 loans made or referred for other lenders and investors ($151.2M)
$13 card fees, brokerage, tech and other ($180.0M)
$59 + $21 + $11 = $91 so about $90 of every $100 ($1,239.8M) is lending or banking.
Lending share: 51% a year ago ($481.4M of $949.6M), 59% in Q2, 59% now.
Looking at the $SOFI chart we need it to clear that Sept $18 level and the 200 day EMA. Then clear $20 and hold to stay away from goblin town we just pumped out of.
More SoFi analysis to come! Two recent posts linked in the replies.
Post on ROTCE:
xitter.cf/notanotherquant/statusâŚ
$SOFI is making more profit from their revenue but they raised so much new equity that returns on that equity havenât improved as much. Their CFO said they still have a lot of extra capital to grow with. To reach their ROTCE target of 20% to 30% they need to put it to work and generate much more revenue from the capital they have.
ROTCE went up to 9.9% in Q3 which is the highest it has been and most of that came from margins.
But after selling about $3.3B of new stock each $1 of equity brings in 56 cents of revenue a year compared to 68 cents before.
To hit their target, their margins have to keep going up and that 56 cents has to get a lot closer to $1.
They plan to do that by putting the extra capital into more loans. Making more loans for partners also helps because they bring in fees without using much of their capital.
But keeping more loans also means more risk from rates. This quarter their loans lost over $800M in value mostly from higher rates and their hedges made back about $734M of it.
SoFiâs revenue breakdown:
xitter.cf/notanotherquant/statusâŚ
$SOFI Q3 earnings are out and about 90% of their revenue comes from lending and banking like it did in Q2.
Lending and financial services both grew 13% from Q2 so the split stayed about the same.
The biggest change in their fee revenue is origination fees which went from $198.5M to $270.9M. 74% of their fee revenue now comes from loans compared to 72% in Q2.
Out of every $100 (adjusted net revenue $1,371.1M):
$59 lending ($807.4M)
$45 financial services and tech platform ($525.1M + $87.4M = $612.5M)
minus $4 corporate items (â$48.7M)
That $45 is:
$21 net interest income from deposits and credit cards ($281.3M)
$11 loans made or referred for other lenders and investors ($151.2M)
$13 card fees, brokerage, tech and other ($180.0M)
$59 + $21 + $11 = $91 so about $90 of every $100 ($1,239.8M) is lending or banking.
Lending share: 51% a year ago ($481.4M of $949.6M), 59% in Q2, 59% now.
$SOFI is making more profit from their revenue but they raised so much new equity that returns on that equity havenât improved as much. Their CFO said they still have a lot of extra capital to grow with. To reach their ROTCE target of 20% to 30% they need to put it to work and generate much more revenue from the capital they have.
ROTCE went up to 9.9% in Q3 which is the highest it has been and most of that came from margins.
But after selling about $3.3B of new stock each $1 of equity brings in 56 cents of revenue a year compared to 68 cents before.
To hit their target, their margins have to keep going up and that 56 cents has to get a lot closer to $1.
They plan to do that by putting the extra capital into more loans. Making more loans for partners also helps because they bring in fees without using much of their capital.
But keeping more loans also means more risk from rates. This quarter their loans lost over $800M in value mostly from higher rates and their hedges made back about $734M of it.
$SOFI Q3 earnings are out and about 90% of their revenue comes from lending and banking like it did in Q2.
Lending and financial services both grew 13% from Q2 so the split stayed about the same.
The biggest change in their fee revenue is origination fees which went from $198.5M to $270.9M. 74% of their fee revenue now comes from loans compared to 72% in Q2.
Out of every $100 (adjusted net revenue $1,371.1M):
$59 lending ($807.4M)
$45 financial services and tech platform ($525.1M + $87.4M = $612.5M)
minus $4 corporate items (â$48.7M)
That $45 is:
$21 net interest income from deposits and credit cards ($281.3M)
$11 loans made or referred for other lenders and investors ($151.2M)
$13 card fees, brokerage, tech and other ($180.0M)
$59 + $21 + $11 = $91 so about $90 of every $100 ($1,239.8M) is lending or banking.
Lending share: 51% a year ago ($481.4M of $949.6M), 59% in Q2, 59% now.
Q2 comparison for $SOFI
xitter.cf/notanotherquant/statusâŚ
I looked at $SOFI through bank measures yesterday because that's where its money comes from with 91% of its revenue last quarter coming from lending or banking.
Out of every $100 SoFi brought in:
$59 came from lending
$21 was net interest income mostly from deposits
$12 came from loans made or referred for other lenders and investors
$13 came from card fees, brokerage, tech and other
Minus $5 of corporate items
$59 + $21 + $12 = $92 but that's rounded up. The exact figure is $91.
SoFi also measures itself this way. Its own long term target is a 20% to 30% return on tangible equity and it was 7.1% last quarter.
What makes SoFi interesting is the products outside lending. 87% of its 24.4 million products aren't loans.
On average a loan still brings in about 10 times the revenue of one of those products.
But more new products are also coming from existing members. 51% last quarter compared to 43% the quarter before.
Five years from now do you think most of SoFi's revenue still comes from lending and banking?
Not Another Quant retweeted
The dollarâs rally has stalled at its 200 week MA. The weak euro is what is mainly keeping the dollar up.
France has a lot of debt and canât agree on a plan to cut its deficit. A lot of hedge funds had borrowed to buy French bonds for the extra yield. When the budget news got worse and oil went back above $100 it looks like they got rinsed.
When people are worrying about Franceâs debt they start worrying about the euro. It looks like some of the money coming out of French bonds is leaving the euro completely. The euro is ~58% of DXY so a weak euro helps hold DXY up.
Moodyâs didnât cut Franceâs rating on Friday and the selling has stopped for now. But the euro could stay weak until France shows it can actually cut its deficit.
The next vote on Franceâs budget is November 3.
