DHUnplugged #821: Gold Standard Ahead

Andrew had the flu. Markets had their own fever.

Earnings ahead. Credit cracking. Have yields peaked?

Oil’s shipping bill explodes. Gold standard chatter returns.

Be nice to your AI. It may bite back.

PLUS we are now on Spotify and Amazon Music/Podcasts!

Click HERE for Show Notes and Links

DHUnplugged is now streaming live - with listener chat. Click on link on the right sidebar.

Love the Show? Then how about a Donation?

Follow John S. Dvorak on X

Follow Andrew Horowitz on X

Warm-Up

- INFLUENZA!

- Earnings Season Ahead

- Are we going back to the gold standard?

- Be Nice to Your AI - They May Bite Back....(OR COOK YOUR BUILDING)

Markets

- Yields may have just peaked...

- Oil prices may not be the end of the problem

- Cracks in credit

- Bank earnings - lots of profits to show

DHU MAILING LIST! - Go to DHUnplugged.com

Cracks in Credit/Real Estate - 2 Charts

Price Reductions

Sellers and Buyers

HERE WE GO: BE NICE TO CLAUDE

- Anthropic prohibits sustained, needless cruelty toward its models; ordinary frustration, pushback and testing are exempt.

- Claude ending abusive conversations remains the main response; account restrictions or suspensions remain possible.

- The policy also removes blanket restrictions on personalized political targeting while retaining bans on deception and voter suppression.

TANKER MAYHEM

- US-to-China tanker hire: about $80 million, versus $74 million for a Falcon 9 launch.

- One US booking reached $41 per barrel in freight, versus $4.50 last year.

- Hormuz shuttle transfers, damaged ships and Africa detours are tying up the fleet.

- Inflation-adjusted tanker rates are the highest since the 1960s, squeezing refinery margins and raising delivered oil costs.

FRANCE SHAKES THE EURO

- France's borrowing premium over Germany reached its highest since the eurozone debt crisis; the euro hit a 17-month low.

- Heavy government spending and political obstacles to fiscal repair are pushing investors toward safer German and Swiss assets.

- Pressure extends into French stocks and corporate credit, while high energy costs add to Europe's economic strain.

- FIGS - Starting to ware on Italy and Greece too.... (Used to be PIIGS)

SOFTWARE MOATS - MEET THE SHOVEL

- REA lets AI agents inspect apps and binaries without source code, understand features and help build comparable versions.

- Potential threat to proprietary software pricing: functionality that took years to develop becomes cheaper to reproduce.

- SaaS still has data, integrations and switching costs; the software itself may become less defensible.

- Not a universal software copier; whether markets have priced in this threat remains an open question.

JAPAN - CYBER EMERGENCY

- Japan issued an emergency cyber warning after widespread attacks on major businesses; Times Car's breach affected 6.6 million accounts.

- AI can lower the cost and skill needed for attacks and help foreign hackers overcome Japanese language barriers.

- AI involvement in this particular wave remains unconfirmed; exposed personal information includes identification and payment details.

FRANCE - HACKERS COOK THE GROCERIES (FAV STORY)

- Hackers hijacked supermarket refrigeration controls, heating units to 122 degrees Fahrenheit; Intermarche initially reported around 150 stores hit.

- Multiple chains suffered spoiled food and reported fires; affected inventory had to be discarded.

- Danfoss said affected refrigeration controllers ran outdated firmware; a shared equipment vulnerability exposed multiple retailers.

- No ransom demand or claim of responsibility had surfaced in the latest report.

JUNK FLASHING YELLOW

- High-yield yields climbed to 8.1%, from 7.22% a month earlier.

- Overall spreads reached 315 basis points; CCC-and-below spreads approached 1,250.

- BB-rated bonds represent over 60% of the market, versus 38% before the financial crisis.

- The warning to watch: widening spreads spreading from weak borrowers into stronger businesses.