Doug Heller

Expat. Emerging markets investor. Thought adventurer. Adapt, innovate and thrive. Lover of Complexity. Details Proliferate; Structure Abides

[Don Johnson @DonMiami3]

Oracle can save itself by cutting AI capex

But by doing so they’ll start a cascade of enormous impact down the entire AI ‘value’ chain

[TraderHC @traderhc]

The process trap this week is burning risk on Monday and Tuesday noise.

Secondary data cannot reprice an outcome already locked in.

The edge is the flow sequence after the presser.

Dealers are short gamma into the event. First vol impulse gets scaled with zero discretion.

Month-end rebalance lands two sessions later as the slower second wave.

Capital preservation Mon-Tue. Dry powder into Wednesday afternoon.

How are you sizing into the event?

[KAHALA @KAHALA123Y]

A real Greek salad has no lettuce, none. If your Greek salad has lettuce in it you have never had a real one. The authentic version takes six minutes, uses five ingredients and tastes completely different from every Greek salad served outside Greece. Here is exactly how it is made.

[Jeffrey Gundlach @TruthGundlach]

For decades the Fed has been following the 2yr UST. Lately, large bond issuance fuels the AI spend boom abetted by iffy ratings. The debt gets placed but soon trades down, suggesting disbelief in the ratings. I expect the raters will soon have to follow the market and downgrade.

[Ricky Ho @rickyho_1989]

China's property crisis has clearly evolved into a fiscal crisis, and that distinction matters because fiscal problems are far more difficult to resolve than corporate ones.

For more than two decades, China's growth model relied on a mutually reinforcing cycle. Property developers purchased land from local governments, land-sale proceeds funded infrastructure and public investment, improved infrastructure raised surrounding land values, and the cycle repeated. At its peak, land sales became one of the largest sources of local government revenue, allowing cities to finance roads, subways, industrial parks and urban expansion without relying solely on tax receipts.

That model is now breaking down. First-half land-sale revenue falling below RMB1 trillion for the first time in more than a decade is not merely a cyclical downturn, but evidence that the property market is no longer capable of financing local governments at the scale it once did. If annual revenue indeed falls toward RMB2.8 trillion, China would be operating with roughly one-third of the fiscal firepower it enjoyed during the peak years of the property boom.

The chart illustrates this transition well. China's broad fiscal deficit has narrowed substantially since early 2025, but this improvement is occurring alongside a sharp deceleration in fiscal expenditure growth. In other words, the deficit is stabilizing not because revenues have recovered, but because governments are increasingly constrained in how much they can spend. That is a fundamentally different type of fiscal consolidation from one driven by stronger economic growth.

The challenge is that Beijing can replace liquidity, but it cannot easily replace cash flow. The central government has several policy tools at its disposal. It can increase fiscal transfers to local governments, expand special sovereign bond issuance, encourage policy banks to lend more aggressively and allow local government financing vehicles (LGFVs) to refinance existing liabilities. These measures can prevent an immediate fiscal crisis and smooth the adjustment process.

However, none of these measures recreates the self-financing mechanism that land sales once provided. Every yuan transferred from Beijing ultimately increases the burden on the central government's own balance sheet, while every additional bond issued shifts future fiscal resources toward debt servicing rather than productive investment.

This is why the property downturn has become structurally important. The issue is no longer simply whether developers such as Evergrande or Country Garden recover. The much larger question is whether local governments can continue funding infrastructure, social services and economic development without their largest historical revenue source.

There are also important second-order effects. Local governments account for the majority of public investment in China. If fiscal capacity weakens, infrastructure spending slows. Slower infrastructure investment reduces demand for steel, cement, machinery and construction equipment. Lower construction activity depresses household income in property-related industries, reinforcing weak consumer confidence and reducing private-sector investment. The feedback loop extends well beyond housing.

This also explains why China's stimulus has appeared less powerful than in previous downturns. During earlier cycles, every yuan of fiscal stimulus was amplified by a functioning property sector that generated additional land revenue and private investment. Today, that multiplier has diminished considerably because one of the key transmission mechanisms is no longer functioning.

Importantly, this does not imply an imminent fiscal crisis. China's central government debt remains relatively manageable compared with many developed economies, and Beijing retains significant policy flexibility through its state-controlled financial system. The risk is not one of sudden insolvency, but one of persistently lower nominal growth as fiscal resources become increasingly devoted to stabilizing existing liabilities rather than creating new productive capacity.

Ultimately, China is undergoing a structural transition away from a property-led growth model. That transition was probably inevitable given the excesses built up over the past two decades, but it is unlikely to be painless. Unless China successfully develops alternative and sustainable sources of local government revenue, such as broader property taxation, stronger consumption taxes or a much more dynamic private sector, fiscal constraints will increasingly become one of the defining features of the Chinese economy over the coming decade.

[Art Berman @aeberman12]

If the Houthis close Bab el-Mandeb, Saudi crude doesn't stop moving—it gets rerouted.

VLCCs can partially unload into the SUMED or Eilat-Ashkelon pipelines, transit the shallow Suez Canal, reload in the Mediterranean, and continue to market.

More complexity. More cost. More risk.

#Oil #Shipping #SaudiArabia #Hormuz #BabElMandeb #Suez #EnergySecurity #Logistics

[TraderHC @traderhc]

Everyone's reading today's tape as risk-off returning. It's not.

$QQQ dropped 1.1% while SPY closed flat, and VIX eased to 18.6 without breaking contango. Real de-risking doesn't print like that. You get vol flipping and everything selling together. None of that hit.

This is duration hedging into mega-cap earnings, not a cascade. And with Services PMI printing 53.6, the cycle is still expanding underneath it.

I'd fade the broad fear and stick with cash-flow cyclicals over pure growth duration. If calm holds into the prints, selective longs win the vol crush.

What's your side?

[OilPrice.com @OilandEnergy]

Kazakhstan's oil exports are under growing pressure as attacks on Black Sea infrastructure disrupt the CPC pipeline, which carries 80% of the country's crude exports. Europe now faces fresh supply risks as alternative export routes remain too limited. #Oil #Kazakhstan #Europe #EnergySecurity

https://t.co/W3eXm93qNK

[Gary Bohm @GaryBohm5]

We are now bumping up against the yield levels that immediately preceded the 2008 Great Financial Crisis. The era of free money is definitively over, and the consequences for the broader economy are going to be severe.

This surge in yields is being driven by a toxic cocktail of relentless government spending, massive budget deficit expansion, the uncertin spending future because of the war in Iran and the resulting debasement of the dollar’s purchasing power.

The Treasury is flooding the market with new debt at a pace that the private sector simply cannot absorb without demanding higher compensation. Furthermore, the massive capital requirements of the artificial intelligence infrastructure buildout are creating an entirely new layer of corporate debt expansion that is competing directly with sovereign issuance.

There is simply not enough capital in the world to fund both the government’s structural deficits and the tech sector’s A.I. ambitions at current interest rates.

[Anthony Scaramucci @Scaramucci]

After reading his book about the war in Ukraine, you will understand the significance of this conflict as never before. Putin thought he could topple Kyiv in days and convinced himself Ukraine wasn't even a real country, and he could not have made a dumber decision. This is an immensely important subject and a powerful conversation, and I hope everyone listens.

Watch/Listen on X, YouTube, Spotify, Apple Podcasts, or wherever you get your podcasts.

Timestamps
0:00 James Verini Introduction
2:08 Why cover the world's most dangerous conflict zones?
3:49 Why Ukraine was more frightening than anywhere else?
5:03 The Mariupol theater, March 2022: a harrowing scene
7:41 Why covering civilians instead of soldiers became the only option?
10:51 The uncomfortable truth: most of us would be civilians, not fighters, in war
11:45 Did the Russians know what they were bombing?
15:13 Wartime propaganda and dehumanizing the enemy
16:13 Focusing on individuals, not generals
19:58 Russian brutality vs. Ukrainian resilience, four years later
24:26 Five Words
28:49 Brother-on-brother war and hope for resolution

[Dustin @r0ck3t23]

Scott Galloway just explained why China doesn’t need to build better AI than America. It only needs to make American AI worthless.

Galloway: “I think China is beginning to engage in what I’ll call AI dumping.”

Not competing. Dumping.

It’s the term economists use for flooding a foreign market with below-cost goods until the domestic industry collapses.

Galloway: “They’re going to have a series of open-weight models. About a third of corporations now are supposedly using Chinese lightweight open-weight models that are cheaper.”

Not better. Cheaper.

A third of corporations. Already.

China isn’t trying to out-innovate Silicon Valley. It’s trying to collapse the economics beneath it.

Price warfare at the infrastructure layer.

Galloway: “If I were Xi, I would just dump cheap AI into the US market.”

This playbook is old. China ran it with steel. Ran it with solar. Ran it with semiconductors.

Flood a market with a cheaper version until the domestic industry can’t sustain itself.

AI is next.

Galloway: “The moment large corporations start announcing they’re disengaging these multi-million dollar site licenses with Anthropic or OpenAI, they’re using these inexpensive Chinese models…”

One CFO after another decides the Chinese model at a fraction of the cost is good enough.

Not better. Good enough.

“Good enough” at a lower price has killed more market leaders than any superior product ever has.

Galloway: “…and the market realizes that there’s no way they can justify these incredible valuations, I think the US market crashes.”

Not because the technology failed.

Because the business model did.

American AI companies are valued on the assumption that corporations will pay premium prices for premium models.

China’s whole strategy is to make that assumption false.

Galloway: “40% of the S&P now is directly or tangentially related to this giant bet America’s making on AI.”

40% of the S&P. Tied to one sector.

Galloway: “The majority of GDP growth over the last two years has come from AI CapEx.”

The majority of GDP growth. From one source.

America didn’t diversify its future. It concentrated everything into a single bet, then left that bet undefended.

Galloway: “If that slows down, we are immediately in a recession.”

Immediately. Not gradually. Not over quarters.

The distance between AI boom and American recession is one procurement decision.

America built the most advanced AI on Earth and forgot to build an economy that survives someone selling it cheaper.

The threat to American AI was never that China would build something smarter.

It was that China would build something cheaper, and American corporations would choose the price.

China’s real weapon isn’t Chinese technology. It’s American capitalism.

The same rational self-interest that built the AI industry will dismantle it the moment a cheaper alternative appears. The market has no patriotism. Only price sensitivity.

The technology race was never the real race.

The real race was always whether America could turn its AI dominance into something that survives being undercut.

America hasn’t even started running it.

China already has.

[Doug Heller @Global_Expat1]

@Marvation_ What is the number for Laporte?

[Doug Heller @Global_Expat1]

@BouafifNour Yes, they are all fragile until proven otherwise.

[Doug Heller @Global_Expat1]

@appiecule Aquiring Rodri is an upgrade for the holding midfielder role--unless you'really and truly ready to trust Bernal in the role. His strength might even allow Barça to move DeJong to the back line with Cubarsí.

[Gary Brecka @thegarybrecka]

Sardines are one of the most nutritionally complete and environmentally sustainable foods available.

A single can provides over two grams of omega-3s, a complete amino acid profile, calcium from the edible bones, Vitamin D, B12, selenium, and CoQ10.

They are also among the smallest fish in the food chain which means minimal mercury accumulation.

[bardenasireales @claude_castera]

Rello.Soria

[Doug Heller @Global_Expat1]

@BouafifNour The list starts with Rodri. If a deal is do-able for €50m or less, it's a steal.

[Doug Heller @Global_Expat1]

@lady_valor_07 1972

[Doug Heller @Global_Expat1]

@appiecule Where does Olmo fit? And could Ferran be substituted for overpriced Julián Alvarez?

[Doug Heller @Global_Expat1]

@appiecule Should be interesting to see. Barça needs Bernal to take a step foward. Is Rodri really "in love" with Real Madrid? He would be an anchor.