Big progress toward ending the government shutdown... last Friday's horrendous consumer sentiment data... troubling job losses... watch out for this echo of Enron... yet another big winner from Jonathan Rose VIEW IN BROWSER After more than a month of stalemate, lawmakers in the Senate finally took the first real steps toward ending the historic U.S. government shutdown last night. Late Sunday, senators voted 60–40 to advance a stopgap funding bill that would reopen the government and keep it running through late January. The bill doesn’t extend Affordable Care Act subsidies – a key Democratic priority – but it does commit to a separate vote on that issue in December. As I write on Monday, we’re still awaiting the Senate’s final vote. If it passes, the measure heads to the House next. Stocks are rallying on the news, with all three major indexes in the green and the Nasdaq leading the way, up nearly 2%. It’s not just relief over the political breakthrough invigorating the bulls – a reopened government means the return of key economic data, giving Wall Street the clarity it craves. As longtime investors know, the market can stomach a lot of bad news, but it hates uncertainty. So, today’s progress tilts the balance back toward confidence – at least for the moment. This encouraging news is a welcome change from Friday's horrendous consumer sentiment news Friday’s University of Michigan consumer sentiment survey showed that Americans’ mood about the economy has sunk to near its lowest reading on record. From CNBC: [The reading of 50.3 indicates] a decline of 6.2% on the month and about 30% from a year ago. Economists surveyed by Dow Jones had been looking for 53.0 after October’s 53.6. Households are burdened by inflation worries, stubbornly high borrowing costs, the ongoing government shutdown, and eroding savings. It’s another sign of the K-shaped economy that continues widening. While those with assets are watching their net worths float atop inflation, those without assets are struggling to keep their heads above water. For months, we’ve been surprised by, and then applauded, the “resilient” U.S. consumer – but sentiment suggests this strength is running out for millions of people. One reason sentiment is crashing is because of the accelerating deterioration in the jobs market If you missed it last week, the October Job Cuts Report from outplacement firm Challenger, Gray & Christmas showed that hiring has slowed to its lowest level in 14 years. But even worse is the explosion of job cuts. Here’s our technology expert, Luke Lango, from last week’s Daily Notes in Innovation Investor: The [Challenger Report] showed a jaw-dropping 153,000 announced layoffs — up 175% from last year and the worst October since 2003. That’s also well above the ~120,000 “uh-oh” threshold that has historically foreshadowed recessions. Not great. The Challenger Report cites “cost-cutting” and then “AI” as the driving factors behind the cuts. Frankly, we’d lump them into the same bucket since AI is how and why companies can cut costs today. Last week, I wrote “the AI dividend won’t be shared by all – just a select few.” We’re starting to see this play out. Speaking of costs, be aware of how Big Tech is funding part of its AI buildout – and history's warning about it The Magnificent Seven companies – the “hyperscalers” – are pledging trillions of dollars toward the AI capital expenditure buildout over the coming years. Here’s consulting giant, McKinsey: Our research shows that by 2030, data centers are projected to require $6.7 trillion worldwide to keep pace with the demand for compute power. How are the hyperscalers paying for this? Much of it is from debt. As one example, in late October, we learned that Meta Platforms (META) has raised $27 billion in private debt to fund its Hyperion data center in Louisiana. Okay, so what? Here’s The Wall Street Journal: By issuing the debt through its venture with Blue Owl, Meta was able to finance the deal off of its balance sheet, people familiar with the transaction said. If you’re an older investor, does this sound familiar? Perhaps you’re recalling a company called Enron? For younger readers, Enron was a Houston-based energy giant that imploded in the early 2000s after using off-the-books entities to hide debt and inflate profits – one of the biggest accounting scandals in history. So, if you’re feeling a twinge of déjà vu, you’re not wrong. Structurally, Meta’s arrangement with Blue Owl echoes what Enron once did – funding massive projects through entities that didn’t technically appear on its own books. Now, let me quickly clarify… Post-Enron reforms and tougher accounting standards require companies to disclose these off-balance-sheet partnerships. Auditors and investors can see them. So, today, it’s more about managing optics than hiding losses. | Recommended Link | | | | Former floor trader Jonathan Rose has discovered a strange anomaly… hidden deep inside the $300 trillion CBOE. He calls it the “Big-Money Tell.” And it gives him a way to invest just before potential major AI-related announcements send stocks flying. Now, Jonathan says the next big AI-related announcement could be coming soon. And you can use his “tell” to invest BEFORE it happens… starting as soon as 7 days from now. How? Click here for full details from Jonathan — before the potential announcement hits. |  | | Still, it's a reminder worth heeding – and it points toward a different worry Even if the hyperscalers aren’t trying to conceal shady accounting with these off-balance-sheet deals, they are trying to keep investors from having sticker shock, so to speak. And this points toward a massive pivot point in tech today… For decades, what made technology so appealing was its capital-light model – heavy on innovation, light on hard assets. Think Microsoft’s “Office” suite that made it gobs of money without any smokestacks, just a few million lines of code, and near-zero marginal cost. Today, the AI era is pulling Big Tech into the capital-intensive world of factories, equipment, and long-dated debt. What happens if/when today’s pricy semiconductor chips and/or buildout equipment go obsolete in just a few years? Or needs massive updating as innovation continues its advance? The trillions in debt remain, eroding net profits – but the payoff isn’t guaranteed. Bottom line: You can put that debt wherever you want – on or off the balance sheet – but net profit is what Wall Street will eventually praise…or punish. To sidestep this potential mess, let's follow the money trail to the businesses facilitating this gargantuan AI buildout and consider investing there This means looking at the metals sector. We profiled the opportunity here in the Digest last week, noting how metals including copper, aluminum, and platinum play a massive role in the AI infrastructure boom – from the power grid, to cooling systems, to data transmission, to the AI chips themselves. For more, let’s go to veteran trader, Jonathan Rose: Materials like copper, platinum, palladium, and more are the backbone of the modern mineral supply chain. Each material goes into everything from the latest AI-equipped chips to EV batteries and drones – you name them, these materials are essential. The face of these technologies? Companies like Meta, Microsoft, Tesla, Lucid, and on and on. But on the back end? It’s a different story. We urged readers to consider a handful of metals-related ETFs. And sure enough, just a few days later, the U.S. government put its stamp of approval on our investment thesis. From Reuters last Thursday: The Trump administration on Thursday added 10 minerals to a list it deems essential for the U.S. economy and national security, including copper, vital to electric vehicles, power grids, and data centers, and metallurgical coal, used to make coke fuel for steel production… The list serves as a blueprint for Washington's push to secure supplies of materials needed for defense, manufacturing, and clean energy technologies. It determines which projects qualify for federal incentives, informs national stockpiling and research priorities, and signals to private investors where the government sees long-term strategic value. Last week, we noted how you can play this as a long-term investor, buying a metals ETF and playing the waiting game – or you can trade it, which is how Jonathan made his subscribers 700% this summer on a portion of their rare earth metals trade on MP Materials (MP). For newer readers, Jonathan is the newest addition to our InvestorPlace family He’s also a trading veteran who’s pulled millions out of the market over the last 10 years. He’s made this fortune, in part, thanks to a market screener he developed that signals when institutional traders make big bets in the market, telegraphing their convictions. He says that this “tells you where the smart money is going before the move happens.” Jonathan went into more details this morning at his Profit Surge Event, joined by Louis Navellier, Eric Fry, and Luke Lango. These four experts covered how their market approaches overlap, and how Jonathan’s specific approach can potentially boost gains by 500% or more on the very same ideas that Louis, Luke, and Eric recommend. You can catch a free replay right here. Bottom line: With Trump now putting key metals on the essential list, it sets the stage for the next round of outsized gains from the sector. And if history is any guide, we can expect Jonathan to be all over the next 700% MP-style surge. On that note, just this morning, Jonathan sent me the screenshot below from his investing community If you can’t see it, Jonathan asks how his readers fared on their Viasat Inc. (VSAT) trade. For context, VSAT is a provider of high-speed satellite broadband services and secure networking systems covering military and commercial markets. It requires rare earth metals for its technology, particularly for the components in its satellites and advanced electronic systems. In response to Jonathan’s question, one of his readers responds that he just made 544%.  We expect plenty more trade set-ups like this from the metals sector in the months to come. Here’s that link again to catch the replay of Jonathan’s Profit Surge Event where you’ll learn more about how to make this type of return in your own trading portfolio. I’ll keep you updated on all these stories here in the Digest. Have a good evening, Jeff Remsburg | 
No comments:
Post a Comment