🦔A Nikkei investigation found that Alphabet, Microsoft, Amazon, Meta, and Oracle have $1.65 trillion in debt that doesn't appear on their balance sheets, more than the $1.35 trillion they officially report. These are GPU contracts, data center leases, and joint ventures that don't count as debt under accounting rules until the facilities go live. Meta's hidden debt is $420 billion, triple its reported debt. Oracle's grew 30-fold in four years. All five declined to comment.

My Take

Nikkei examined the actual filings and put a number on something the BIS already flagged as "shadow borrowing" back in March. These companies owe more off their balance sheets than on them, and the accounting rules let them keep it that way until the data centers go live. That's legal, but it means investors looking at quarterly earnings this week are seeing less than half the picture.

Four of these five report earnings in the next two weeks. The reported debt will look manageable. The $1.65 trillion in footnotes won't make the headlines. But when those data centers start operating, the leases hit the books all at once. If AI demand comes in below projections, those facilities get marked down and the losses land on the investors and insurance policyholders who funded the construction through private credit and project bonds without realizing how much total exposure they were carrying.

Hedgie🤗

Quick reactions to the Houthi blockade on Saudi Arabia announced this morning, just before U.S. markets opened.

TL;DR: What matters isn’t just lost oil exports from Yanbu, but also lost Saudi and GCC grain IMPORTS through the Red Sea.

Basically, Iran and the Houthis are threatening the Saudi economy with exactly the sort of broad-based economic warfare the U.S. is subjecting Iran to through its blockade.

There are 5 major Saudi ports in the Red Sea. From north to south they are Duba, Yanbu, King Abdullah, Jeddah and Jazan. Southern ports are most exposed to Houthi attack.

Yanbu sends 4.5 mb/d of oil into global markets. If Houthi attacks shut down operations for a meaningful span, that’s obviously a big blow to markets.

But since the Iran War shut down Hormuz, Saudi’s Red Sea coast has become ever more crucial for dry goods imports like wheat, rice, consumer goods, etc., flowing not just to Saudi markets but other Gulf countries, too.

Saudi Arabia has massive wheat stockpiles, enough for 4-6 months of normal consumption. But they don’t have large reserves of rice or feed grains, meaning that other pantry staples and dairy/meat production could be more affected.

It’s highly unlikely that anyone in Saudi or the Gulf countries will starve if food imports are curtailed, even for months.

But it will make like unpleasant for those living there. Scarcity will push local inflation — prices of food and consumer goods will go up, putting pressure on the government to change its policies.

Does that sound familiar? Again it’s the basic strategy the U.S. is trying to pressure Iran, without much luck so far.

One other thought: It’s noteworthy that the blockade is targeting Saudi Arabia specifically, not international shipping through the Bab-el-Mandeb strait.

The targeted approach suggests to me that Iran and the Houthis are trying to keep a handle on escalation, and to show restraint but also hold capacity in reserve to target all shipping should the conflict escalate further.

The culture war is not a malfunction of American democracy.

It is a feature of American empire.

While the State Department was funding opposition media in Venezuela, American media was running wall-to-wall coverage of which bathroom transgender people should use.

While the CIA was training civil society organizations to destabilize governments in Eastern Europe, American workers were being told that the reason their wages hadn't moved in thirty years was immigration.

While the Pentagon was spending $300 million on a single failed program in Syria, American teachers were buying their own classroom supplies and working second jobs.

The noise was never accidental.

The noise was the point.

A population fighting each other over the cultural battlefields the ruling class assigned them cannot simultaneously look upward at the people assigning the battlefields.

That is not a conspiracy theory.

That is a management strategy.

It has a budget. It has architects. It has decades of documented results.

And the first sign that it is working is that the people inside it call anyone who describes it a conspiracy theorist.

We are seeing more videos of Iranian and Russian missiles go unopposed.

The destruction forced interception duties onto already-depleted Patriot systems, compounding a crisis that saw the US and GCC allies burn through 86% of their combined Patriot inventory within five weeks.

That's why the US isn't intervening against the Russians directly in Ukraine. Better to hide a proxy when the US military knows it does not have the military capabilities to fight an extended war.

Iranian drone attacks on CIA facilities in the Gulf prompted US intelligence analysts to investigate whether Russia assisted by providing targeting information or advanced drone technology, said four people familiar with US intelligence

(Grain of salt as usual on posts from the MSM, but this one is likely).

Reddit dropped 9% after the Wall Street Journal reported it may not renew its $60 million deal letting Google train AI on its content. USA Today, Politico, Reuters, and The Economist are all reconsidering too. Google's AI Overviews answer questions directly above search results, so users never click through to the source. USA Today's traffic from Google fell nearly 50% in a year. Business Insider dropped 85%.

My Take
I think Google overplayed its hand and this is where it starts to cost them. Publishers tolerated AI training deals because Google sent them traffic in return. Now Google is using that training to replace the traffic, and publishers are figuring out that the deal only benefits one side. Google is also the same company being sued for using Google Books content to train Gemini, whose own internal documents estimated tens of billions in fines before they went ahead anyway. At some point you run out of people willing to hand you their content for free, and I think we're reaching that point.

Reddit's in a tough spot and I think they'll eventually walk. The $60 million from Google helped fuel a 69% revenue jump last quarter, but that money buys Google the right to train on content that then makes Reddit less discoverable in search. Every month the deal continues, Reddit is paying for its own decline in visibility. Reddit CEO Steve Huffman reports earnings July 30 and will probably have to address this. I'd bet the renewal either dies or comes back at a much higher price with restrictions on how the content gets used.

Hedgie

Then Netanyahu goes on to claim influence over the House and Senate: “We have the Senate, Congress, and a very strong Jéwish Lobby.” And continued: “We have strong influence over America.” So, as I pointed out in the quoted clip, when Netanyahu says “America is the New Rome” and later says he’s reading a book on “Jéws Against Rome,” I really have no idea why ANYONE would consider Isræl an “ally”!?

What is your uncrossible line?

I live in Türkiye, and the roof of my house has been damaged.

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