Capital Costs Rise as Markets Eye Midterms

CoreWeave

Across the shows: 36 speakers in other episodes, 8 bullish and 28 bearish calls, past 30 days

• George Noble · Noble Capital AdvisorsBearish

  CoreWeave is a better short than before; its fixed-income pricing signals it is circling the drain.

  He says CoreWeave is a better short now at around $60 than it was at $107, because it is circling the drain on the pricing of its fixed-income instruments. He describes the stock as the most indebted balance sheet with the highest operating leverage. When the tide goes out, those are the companies that get shot first. He says his fund's largest position is a short and that he doubled down about two weeks earlier.

  “Core Weave, I would argue, is a better short today at 60 or wherever it is, and it was a 107 because they're circling the drain in terms of the pricing of their fixed income stuff.”at 6:30

Space Exploration Technologies

Across the shows: 25 speakers in other episodes, 18 bullish and 7 bearish calls, past 30 days

• George Noble · Noble Capital AdvisorsBearish

  SpaceX is the most overpriced large company ever; the valuation is about 100 times revenue.

  He says a market cap of about $2.2 trillion means the revenue beat, whether $40 billion or $60 billion, does not matter. He compares it to Scott McNealy's warning about buying companies at 10 times revenue, saying this one trades at about 100 times revenue, and 'you can't get from here to there'. He also flags a large unlock of more than a billion shares in the next week or two as a risk.

  “I think SpaceX is the most over... Egregiously overpriced company at scale in history of capital markets.”at 10:01

Oracle

Across the shows: 15 speakers in other episodes, 0 bullish and 14 bearish calls, past 30 days

• George Noble · Noble Capital AdvisorsBearish

  Oracle's credit default swaps signal stress from AI spending without cash flow to cover the debt.

  He points to Oracle's CDS as evidence that the market is pricing its debt as risky. He says narrative and dreams are colliding with a lack of cash flow and too much debt, and that the CDS shows this. He describes Oracle as 'ditto' to CoreWeave, which is a short for him, so he is bearish on Oracle's AI-linked borrowing.

  “And that's what, you know, the Oracle CDS are telling you. That's what the Core Weave bonds are telling you.”at 13:53

US elections & politics

• Gautam Mukunda · Yale School of Management

  Democratic voters' discontent with their party will fade if Democrats win a resounding midterm victory.

  He says most of the Republican-Democratic gap in the poll comes from Democrats who are unhappy with their own party. The average Democrat mainly wants to see the party win. A resounding victory in the midterms would lift those ratings a lot, so the fix is simple: win.

  “If the Democratic party wins a resounding victory on... In the midterms, that number will shoot up because Democrats... The average Democrat, what they really wanna do is see their party win.”at 36:25

• Gautam Mukunda · Yale School of Management

  Polling averages point to Democrats taking about 54 Senate seats, driven by Trump's weak numbers and poor candidates.

  He says that if you simply read the polling averages, Democrats would win about 54 Senate seats. He presents this as a reading of polls, not a prediction, and says it would have looked insane six months ago. He attributes it to Trump's abominable numbers and to Republican candidates who built careers in red states, never had to run a competitive general election, and have forgotten how.

  “if all you did was took... Take the polling averages and just read them out, you would expect Democrats to win 54 seats in the senate.”at 36:55

• Gautam Mukunda · Yale School of Management

  A Democratic House would focus on investigating corruption, linking Republican affordability failures to theft from voters.

  Mukunda reasons that because no one expects significant legislation to pass, a Democratic-led Congress would focus on investigations. He says Democrats have a persuasive argument that links affordability to corruption in the Republican Party and the Trump administration, which he describes as having an enormous number of easy targets. The core political message, in his view, is that people are paying too much because it is being stolen from them.

  “my bet would be their focus is gonna be investigations... they're gonna look for corruption in the Republican Party, in the Trump administration... the political argument is you are paying too much because it's being stolen from you.”at 38:47

• Gautam Mukunda · Yale School of Management

  Trump's broken price promises and a disastrous foreign war are driving voter backlash ahead of the midterms.

  Mukunda says Trump was elected on promises to cut prices immediately and avoid foreign wars. He argues that his actions raised prices and launched the US into a disastrous foreign war. Even with Trump's charisma and political skill, Mukunda says the electorate has noticed that Trump appears to have done the opposite of what he campaigned on. He frames the midterm result as a consequence of those actions.

  “Donald Trump was elected... making promises... he would take prices down immediately, and he would make sure we did not have any foreign wars. And he took a bunch of actions that raised prices, and he launched us into a disastrous foreign war.”at 39:41

• Gautam Mukunda · Yale School of Management

  Trumpism will keep leading the GOP toward 2028 because officeholders fear primaries more than general elections.

  Mukunda argues that Trump's hold on the Republican base is strong enough that his endorsements can make weak candidates, such as Darlene Graham in South Carolina and Ken Paxton in Texas, automatic winners. He says Republican officeholders are more afraid of a primary than a general election. Off the record, he says they fear more than electoral loss, since Trump attacking them on Twitter brings thousands of threats, which keeps the party aligned behind him.

  “As long as his hold on the Republican party base is as strong as it is... As long as Republican officeholders are more afraid of a primary than they are of a general...”at 40:36

• Gautam Mukunda · Yale School of Management

  Democratic House leadership will be held together by anti-Trump unity, but coalition management becomes hard under a Democratic president.

  Mukunda expects Speaker Jeffries to manage a less fractious caucus because it will be united by its hatred of Trump. He notes a problem with the Democratic party's aging leadership, since committee chairs may be questioned about whether they are up to the job. He says the bigger coalition-management challenge would come if a Democrat wins the presidency in 2029.

  “the caucus will be united by its hatred of Donald Trump. Where that's going to become a real problem is if we get a democratic president in 2029...”at 42:06

US stock market outlook

• George Noble · Noble Capital Advisors

  Leaning more bearish on the market each day, but has high conviction in which stocks will work.

  He has refrained from a big market call and is leaning bearish more each day. He says the market is a market of stocks, not the economy, and that the AI trade is getting worse. His conviction is in stock selection rather than index direction, which he says is the lazy approach to skip.

  “I'm leading bearishly with each... More bearishly with each passing day. But have much higher conviction in what's working, what will work, and what won't work.”at 3:56

Oil & fuels

• George Noble · Noble Capital Advisors

  Remains very positive on energy; the stocks are cheap and oil is underinvested, though he hopes oil doesn't spike.

  His bull case rests on valuation, not the Strait of Hormuz. Energy is about 3.5% of the S&P 500 but produces a large share of its free cash flow, so stocks are very cheap. Depletion runs at 4–5% a year, and years of underinvestment have left trillions of dollars of needed capex unspent. He says a sharp rise to $150 or $200 oil would bring recession worries, so he prefers a modest rise. He points to the deferred oil futures curve starting to move up as the signal for energy stocks.

  “The bull case for energy is energy accounts for three and a half percent of the S and P... Stocks are very cheap.”at 11:44

Middle East & Iran

• George Noble · Noble Capital Advisors

  Hormuz disruption will push economic actors to develop oil supply outside the Gulf.

  He argues the lasting effect of the Strait of Hormuz disruption that began on February 28 will be a realisation that the Strait is not a secure source of oil. That realisation will lead economic actors to develop oil supply elsewhere. This is the mechanism behind his bullish energy view, which he says does not depend on a peace deal.

  “the lasting impact of Straits Of Hormuz is gonna be that people... oh, wait a second. Maybe that's not a secure source of oil. Maybe we have to develop oil elsewhere.”at 12:09

US deficit & government debt

• George Noble · Noble Capital Advisors

  Policymakers will devalue debt through money printing rather than let debt deflation play out.

  He sets out two ways a bubble can clear: debt deflation, or a soft default in which debt is devalued by printing money. He says policymakers always choose the second, because it is less painful. He says the current world is awash in liquidity, and that this makes the soft-default route the likely one. He links this to hope for gold.

  “The policymakers always opt for door number two. It's less painful than door number one.”at 13:44

US Treasuries & yields

• Steve Laipply · BlackRock

  Treasury yields are decoupling from oil and retracing after a sharp rise.

  He says investors have been trying to explain how real yields reached 3% at the long end and the fives so quickly. The narratives given were oil, then deficits, then AI capex, with term premium as the catch-all, and he thinks it is probably all of these. Now there is a sharp retracement. TLT was down about 8% for the year and has recovered half of that over the last couple of weeks. Treasuries are decoupling from the oil dynamic. Flows have been concentrated in the front end, and short-end Treasury ETF inflows are close to $50 billion year to date.

  “this recent decoupling of treasuries from the oil dynamic, and we're seeing more of that today.”at 27:00