• Great earnings are still not good enough

• The market is punishing both sides of the AI/SI narrative

• Cash is king

• Warsh is voicing the need for patience

• Positioning is light

• Inflation jumps as expected

• GDP growth has accelerated

• Quick Hits

• Where did all the crypto money go?

• Chart Crime of the week

• Birkins are the new Lambos        

Great earnings are still not good enough.  The mega-cap hyperscalers are reporting strong growth that is beating expectations.  But they are also signaling that capex spending on Artificial Intelligence is still accelerating.  And this spending is being paid for by equity and debt issuance not cash flow.  And that is the problem.  The market’s patience has worn thin.  While these market leaders have mostly been moving in sync with each other, there is starting to be some differentiation.  Logically, this comes down to which companies can monetize their spending.    Oddly, the recipients of this AI/SI largesse are also being punished.  This strange anomaly is likely a function of traders still unwinding once-successful positions.  We also think there has been a heavy dose of equity guys all of a sudden becoming fixed income experts.  The neoclouds are glaring examples of this (not that we own any of the resellers of compute, but they all get lumped together regardless of their balance sheets and/or growth prospects.  See comments from Musk below).  The elections have also added another layer of uncertainty.  Despite all the negativity (the positioning data points to extreme selling), we have not reached that pure panic moment.  The market always needs one last gasp that flushes out the last of the bahgholders.  We had that in Leopold in July.  We need another one.