the things they carried

market vibes

November 11…)

Thank you for your service.

Stepping back to start the NY session, total extant global debt including foreign sovereign, federal, state urban household, student, and all known forms of credit for all durations etc. is estimated at 337.7 trillion USD and growing at the rate of 4 to 5 trillion USD per quarter. (Sources: Institute of International Finance (IIF), BIS, IMF, and others via Grok).

According to these sources, total global debt is expected to rise a record $33 trillion in 2025 and grow at the rate of $6 to $8 trillion per quarter in 2026. Debt service is estimated at $13 trillion to $15 trillion in 2025. Into this, the trend AI build is expected to cost circa $5 trillion in the next 5 years with 50% of capex coming from equity and debt issuance at a time when the other 50% will be borne by earnings and cash flow.

This scenario implies $2.5 trillion new issuance of 80/20 debt and equity, limited buybacks, dilution, and even before potential/probable overruns, energy shortages or price spikes, construction delays, yada yada … In a race to the finish line, the price of revolution never goes down. So hold that thought and think globally as you do.

Last week’s market heart stopper was Challenger Gray & Christmas’ tally of eye-popping job losses which lit up an AI bubble narrative which btw has vanished from the new narrative, “canceled flights.” As the holiday season approaches, key retailers are not even publishing part-time demand for workers. The national Retail Federation anticipates seasonal jobs will be down 40% in 2025 (via Forbes/Google AI)..

Simply put and broadly implied, AI cost savings create an arithmetic doom-loop: for every job displaced, measurable lost revenues will impede earnings to fund $2.5 trillion (50% of capex) as equity dilution and debt service go up. Either this narrative is false by omission or bad math, in my opinion.

AI doesn’t risk a recession, some think we are already in one. AI guarantees recession for part-time workers this Christmas. If AI meets estimates, next Christmas might be OK for Amazon if their customers can afford their Prime subscriptions. The overwhelming consensus for funding AI relies on unsecured debt. Existing AI equities will not be held as loan collateral to shield balance sheets from unforeseen exigencies because “tech stocks are too volatile,” according to Grok’s analysis.

One more thing. If total extant global debt is $350 trillion by January 2025, and rising to $400 trillion by January 1, 2026 (with debt service at $20 trillion +/-) … who owns it?

In the markets this morning

Silver is cruising higher in light volume. Open interest was up a healthy 5,000 lots on the Comex yesterday or 25 million ounces. In the day structure we want to see prices continue to develop higher.

However, if the low of the day is violated, that’s fine. It simply means the market is attracting some profit taking. Continued horizontal development is not a bad thing. Allow the market to breathe in positive territory so when and if the larger auction takes prices higher, an orderly trend is far more desirable to a vertical spike. A spike will usually kill a trend or at least shut it down for a few weeks.

My silver comments mirror the gold market today.

Stocks are out of the woods and back in the range. Theta will crash and the options books will deliver their harvest. I don’t see anything else. Same old same old. If, however, Nvidia can rally to 60 times earnings and the rest of the market can get Burry to cover (lol) maybe the S&P can add a trill and hit $61T. Oh boy!

There’s not a lot of risk in stocks now, with the entire global financial community watching their basket of AI eggs. But not a lot of money to make with all of it going to the hens, in my opinion.

In other markets charts have nothing to say. PGMs are getting a mild “me too” rally from gold and silver. Oil is a few cents higher in quiet trading. Bitcoin can’t hold a rally. The dollar is sleeping.

No vibe today …just this to honor our friends and fathers.

“At the hour of dusk you sit at your foxhole and look out on a wide river turning pinkish red, and at the mountains beyond, and although in the morning you must cross the river and go into the mountains and do terrible things and maybe die, even so, you find yourself studying the fine colors on the river, you feel wonder and awe at the setting of the sun, and you are filled with a hard, aching love for how the world could be and always should be, but now is not. You’re never more alive than when you’re almost dead.”

Tim O’Brien, The Things They Carried (March 1990)

Cheers!

JJ