Key Takeaways
- Nine major tech companies hold ~$3 trillion in off-balance-sheet AI commitments versus only $600B in reported capex, signalling a potential hidden liability for investors. — via 1
- Global stocks set record highs (S&P 500, equal-weight, small caps, mid caps, Europe) while valuations compressed and profit margins rose, suggesting a broadening, earnings-led bull market. — via 1
- Tech is up ~65% since early 2025, but forward P/E has fallen from 29x to 22x, confirming gains are driven by earnings rather than multiple expansion. — via 1
- U.S. fiscal accounts show $4.5T revenue vs $6.3T spending in FY2026’s first 10 months; “balanced budget” claims are false. — via 1 2
- Long-duration bond ETFs are down 63% from their March 2020 peak as the 30-year yield climbed from 0.8% to 5.3%, illustrating rate risk from cyclical lows. — via 1
1. Markets and AI: Record Highs, Earnings-Led Rally, and Hidden Capex Risks
- In a broad-based move last week, the S&P 500, equal-weight index, small caps, mid caps, and European stocks all set record highs, while emerging markets approached highs. Valuations fell and profit margins rose, challenging froth narratives and suggesting the bull market is broadening. — via 1
- Since the start of 2025, tech is up roughly 65%, yet its forward P/E has dropped from 29x to 22x. That points to earnings growth—not multiple expansion—as the primary driver of the rally. — via 1
- The top 10 S&P 500 performers this year are all beneficiaries of the AI infrastructure boom, underscoring how concentrated the AI trade remains. — via 1
- Nine major tech companies hold roughly $3 trillion in off-balance-sheet commitments compared with $600B in reported capital expenditures. That means the AI arms race is creating large obligations investors may be underestimating, with potential future balance-sheet stress. — via 1
2. Macro and Rates: Fiscal Deficits, Bond Losses, and Mixed Manufacturing Data
- Charlie Bilello criticizes U.S. fiscal policy, noting that across presidents and parties, the direction has been more money printing, more debt, and higher prices. In the first ten months of FY2026, federal revenue was $4.5T versus $6.3T of spending, so “balanced budget” claims are false. — via 1 2
- Long-duration bond ETFs have fallen 63% from their March 2020 peak. The cause: the 30-year Treasury yield rose from an all-time low of 0.8% to 5.3%, illustrating how punishing rising rates can be for long-duration assets. — via 1
- Ben Carlson pushes back on the claim that the 2020s stock strength is due to government debt/spending: China runs larger deficits and carries more government debt, yet its stock market has barely risen this decade. — via 1
- The August New York Fed manufacturing index jumped to 20.6, well above the 10.0 expected and 15.6 prior. However, new orders, shipments, and employment all retreated from prior readings, while prices paid rose to 58.6—a mixed signal with lingering price pressure. — via 1
3. Long-Term Returns and Behavioral Mistakes
- February 2000 marked the monthly peak of the late-1990s tech bubble. From then through July of this year, the Nasdaq 100 gained an annualized 8.2%—yet still slightly lagged the S&P 500 and Dow 26 years later, a reminder of how severe overvaluation can be. — via 1
- Meb Faber channels David Booth: people today more easily gamble under the guise of investing. He adds that both GPs and LPs delude themselves into thinking they’ll be in the top quartile—otherwise the job wouldn’t make sense—but 75% won’t be, a massive illusion. — via 1 2
- For retirees, paying all-cash for a home effectively locks in around a 6% return by saving interest and acts as a hedge against market drawdowns. This aligns with a long-term strategy to manage sequence-of-returns risk. — via 1
